In recent years, for most emerging markets, public debt has decreased and its composition has evolved toward domestic currency. This progress is remarkable in terms of reduced financial vulnerability, which has been underpinned by favourable financing conditions and related deepening of local...

We incorporate monetary policy into a model of stochastic debt sustainability analysis and evaluate the impact of unconventional policies on sovereign debt dynamics. The model optimizes debt financing to trade off financing cost with refinancing risk. We show that the ECB pandemic...