
S. Ali Abbas (ed.)
et al.
Published online:
19 December 2019
Published in print:
17 October 2019
Online ISBN:
9780191885693
Print ISBN:
9780198850823
Contents
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1. Introduction 1. Introduction
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2. Defining Sustainability 2. Defining Sustainability
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A. The government budget constraint A. The government budget constraint
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B. Government solvency and public debt stability B. Government solvency and public debt stability
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C. Econometric approaches to debt sustainability C. Econometric approaches to debt sustainability
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3. Quantifying Credibility (“Debt Limits”) 3. Quantifying Credibility (“Debt Limits”)
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A. Fiscal fatigue and debt limits A. Fiscal fatigue and debt limits
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B. Why do countries with sustainable debts default? B. Why do countries with sustainable debts default?
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Market exclusion Market exclusion
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Market discipline Market discipline
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Legal sanctions Legal sanctions
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Collective negotiation Collective negotiation
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Domestic costs Domestic costs
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4. Modelling Uncertainty 4. Modelling Uncertainty
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A. Stress tests A. Stress tests
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B. Fan charts B. Fan charts
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5. Incorporating Liquidity 5. Incorporating Liquidity
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A. Early warning models A. Early warning models
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B. Sovereign spreads B. Sovereign spreads
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6. Emerging Issues 6. Emerging Issues
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A. Debt sustainability in members of currency unions A. Debt sustainability in members of currency unions
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B. Low interest rates B. Low interest rates
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C. Beyond debt C. Beyond debt
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7. Concluding Remarks 7. Concluding Remarks
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Annex 1. Debt sustainability analysis at the IMF Annex 1. Debt sustainability analysis at the IMF
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References References
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Cite
Debrun, Xavier, and others, 'Debt Sustainability', in S. Ali Abbas, Alex Pienkowski, and Kenneth Rogoff (eds), Sovereign Debt: A Guide for Economists and Practitioners (Oxford , 2019; online edn, Oxford Academic, 19 Dec. 2019), https://doi.org/10.1093/oso/9780198850823.003.0005, accessed 14 May 2025.
Abstract
Why can Japan sustain debts above 200 percent of GDP, while Ukraine defaulted on its debt when it was 30 percent of GDP? This chapter investigates what causes a country to default and hence how to assess the sustainability of sovereign debt. It begins by looking at why a sovereign my renege on its debt operations—because it makes a strategic choice (willingness-to-pay models), or because it is forced to (ability-to-pay models). The bulk of the chapter will look at the different techniques for assessing debt sustainability, highlighting the work of the IMF as well as other models.
Xavier Debrun, Jonathan D. Ostry, Tim Willems, and Charles Wyplosz., Debt Sustainability In: Sovereign Debt.
Edited by S. Ali Abbas, Alex Pienkowski, and Kenneth Rogoff, Oxford University Press (2020).
© International Monetary Fund.
DOI: 10.1093/oso/9780198850823.003.0005
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