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Sovereign Debt Sustainability and Central Bank Credibility

Author

Listed:
  • Tim Willems
  • Mr. Jeromin Zettelmeyer

Abstract

This article surveys the literature on sovereign debt sustainability from its origins in the mid-1980s to the present, focusing on four debates. First, the shift from an “accounting based” view of debt sustainability, evaluated using government borrowing rates, to a “model based” view which uses stochastic discount rates. Second, empirical tests focusing on the relationship between primary balances to debt. Third, debt sustainability in the presence of rollover risk. And fourth, whether government borrowing costs below rates of growth (“r

Suggested Citation

  • Tim Willems & Mr. Jeromin Zettelmeyer, 2022. "Sovereign Debt Sustainability and Central Bank Credibility," IMF Working Papers 2022/016, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2022/016
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    Cited by:

    1. Michele Andreolli & Hélène Rey, 2024. "Fiscal Consequences of Missing an Inflation Target," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(2), pages 701-772, June.
    2. António Afonso & Francisco Gomes-Pereira, 2024. "Does Monetary Policy Influence Euro Area Fiscal Sustainability?," CESifo Working Paper Series 11266, CESifo.
    3. Powell, Andrew & Panizza, Ugo, 2023. "Debt Reduction in Latin America and the Caribbean," IDB Publications (Working Papers) 13290, Inter-American Development Bank.
    4. Czeczeli, Vivien, 2023. "Az államadósság fenntarthatósága alacsony kamatkörnyezetben [The sustainability of public debt in a low interest rate environment]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1361-1388.
    5. Togan Eğrican, Aslı & Caner, Selçuk & Togan, Sübidey, 2022. "Reforming public debt governance in Turkey to reach debt sustainability," Journal of Policy Modeling, Elsevier, vol. 44(5), pages 1057-1076.
    6. Eccles, Peter & Grout, Paul & Zalewska, Anna & Siciliani, Paolo, 2023. "Open banking, shadow banking and regulation," Bank of England working papers 1039, Bank of England.
    7. Ricardo Reis, 2022. "Debt Revenue and the Sustainability of Public Debt," Journal of Economic Perspectives, American Economic Association, vol. 36(4), pages 103-124, Fall.
    8. Khaliq Ul Rehman & Ghulam Ghouse, 2024. "Examining Inflation Expectations within Asian Economies: Application of Wavelet Quantile Analysis towards Assessing Monetary Policy Credibility," Journal of Economic Impact, Science Impact Publishers, vol. 6(1), pages 70-80.

    More about this item

    Keywords

    sovereign debt; debt sustainability; fiscal policy; debt crises; fiscal-monetary interactions; central bank credibility; credibility of the central bank; market value; credibility function; marginal utility; Ponzi scheme; Debt sustainability; Fiscal stance; Debt financing; Debt sustainability analysis;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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