The structure of sub-national public debt in Spain: a reflection of fiscal vulnerabilities ?

We analyze the determinants of the structure of public debt in the case of Spain, from a sub-national perspective. The endogenous shift in the composition of debt among short- vs long-term instruments, loans- vs securities, or residents vs non-residents, depends on observable measures of credit and liquidity risks. Thus, excessive reliance on short-term and “captive" (loans, residents) instruments might be an indicator of potential vulnerabilities to international financial crises, in particular when governments face a debt crisis that mixes elements of illiquidity and insolvency. On the other hand, though, some theories advocate that the structure of public debt should be an ex-ante economic stability management device. We carry out our analysis by using a newly available dataset of quarterly data for the period 1995Q1-2012Q4, to run our GMM estimates. See above See above