The recent euro area sovereign debt crisis has shown the importance of market reactions for the sustainability of debt. The objective of this paper is to calculate endogenous government debt limits given the markets assessment of the probability to default. The estimated primary balance reaction...

The euro area sovereign debt crisis has highlighted the importance of reducing public debt levels and building up sufficient fiscal buffers during normal and good times. It has also reaffirmed the need for a thorough debt sustainability analysis (DSA) to act as a warning system for national...

The Partnerships pillar of the 2030 Agenda for Sustainable Development cuts across all the goals focusing on the mobilisation of resources needed to implement the agenda. Thailand’s “sufficiency economy philosophy” encourages the prioritisation of long-term sustainability over short-term...

Consecutive years of primary deficits have led to mounting public debt of almost 50% of GDP, one of the fastest increases in Latin America over the last decade. Government attempts to restore fiscal health have been undermined by a gridlocked Congress. While only minor reforms have been enacted...

In the wake of the financial crisis there has been renewed focus on the importance of a country’s net external debt position in determining domestic interest rates and, relatedly, its vulnerability to a crisis. This paper extends the panel estimation of OECD countries described in Turner and...

Despite sustained efforts made in recent years to rein in budget deficits, a majority of OECD countries still face substantial fiscal consolidation needs. The choices made about which spending areas to curtail and which taxes to hike will have implications for near-term activity and long-term...

Hungarian debt level has steadily increased since 2001, with the debt-to-GDP ratio reaching about 84% at end-2011. This high level combined with significant volatility of macroeconomic variable influencing potential future debt paths – GDP growth, exchange rate and interest spreads – put...

The sharp rise in debt experienced by most OECD countries raises questions about the prudent debt level countries should target. It also raises questions about the fiscal frameworks needed to reach them and to accommodate cyclical fluctuations along the path towards a prudent debt target. The...

This paper investigates the effect of structural characteristics on debt limits of middle income countries. Two equations relate the probability of default to the interest rate. First, the probability of default is estimated with a logit model. Second, the assumption of non-arbitrage opportunity...

This paper provides robust empirical evidence that government effectiveness is a key determinant of sovereign defaults. Government effectiveness is measured by a broad-based perception index of the Worldwide Governance Indicators database (WGI) disseminated by the World Bank. Public debt and...