Debt Sustainability Analysis for Euro Area Sovereigns: A Methodological Framework

Warmedinger, Thomas; Checherita‐Westphal, Cristina; Drudi, Francesco; Setzer, Ralph; Stefani, Roberta De; Bouabdallah, Othman; Westphal, Cristina Checherita

doi:10.2139/ssrn.2950979

Cited by 24 publications

(8 citation statements)

References 14 publications

(16 reference statements)

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“…In this paper, the endogenous reaction of GDP and inflation in alternative scenarios is switched off and the assumptions obtained from the macroeconomic models are used. For more details, see Bouabdallah et al (2017).…”

Section: Box 5 Models and Fiscal Multipliersmentioning

confidence: 99%

“…The macroeconomic and financial assumptions for the public debt simulations are taken from the model simulations. This approach allows the granularity of the ESCB's public debt sustainability tool in terms of fiscal assumptions, debt composition and interest rate structure (Bouabdallah et al, 2017) to be combined with the general equilibrium analysis using the EAGLE and ECB-MC models.…”

mentioning

confidence: 99%

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The Economic Impact of Next Generation EU: A Euro Area Perspective

Bańkowski

Bouabdallah

Semeano³

et al. 2022

SSRN Journal

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Section: Box 5 Models and Fiscal Multipliersmentioning

confidence: 99%

mentioning

confidence: 99%

The Economic Impact of Next Generation EU: A Euro Area Perspective

Bańkowski

Bouabdallah

Semeano³

et al. 2022

SSRN Journal

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“…1. Solvency risks are associated with the size of net present value liabilities exceeding the net present value of assets -or a country is insolvent when the net present value of future primary balances is smaller than outstanding debt (Bouabdallah et al (2017), Roubini (2001)). Thus, if obligations become so large that no future primary balances can finance the debt, a government might default.…”

Section: The Fundamental Indexmentioning

confidence: 99%

Debt Vulnerability Analysis: A Multi-Angle Approach

Doemeland¹,

Estevão²,

Jooste³

et al. 2022

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Policy Research Working Paper 9929Countries with high debt exposure are vulnerable to economic and financial shocks that could lead to sovereign defaults. This paper develops a methodology to identify countries that are at risk of debt default based on four elements of debt vulnerability. These elements capture the different ways in which risks associated with high debt are assessed, namely: (i) the fundamental, (ii) the subjective, (iii) the judgmental, and (iv) the theoretical. The fundamental element considers the liquidity, solvency, and institutional risk elements of debt vulnerability. The subjective element captures the investors' perceptions of debt default, while the judgmental element is based on the debt thresholds as defined by Debt Sustainability Frameworks. Finally, the theoretical element is normative and captures what ought to be. The methodology constructs an index for each of these four elements and uses them as predictors in a model of public debt default. The methodology flags countries that are at risk of default by means of machine learning techniques and delivers outputs that point to underlying causes of vulnerability. The methodology complements existing monitoring tools for assessing debt sustainability. This paper is a product of the Macroeconomics, Trade and Investment Global Practice. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp.

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“…Therefore, a fourth component, reflecting the cost of delay, is added to the equation. 182 Summaries of the methods used are available in e.g Bouabdallah et al (2017), European Commission (2019, Alcidi and Gros (2018), Corsetti (2018), and.…”

Section: The New Art Of Debt Sustainability Analysis (Dsa)mentioning

confidence: 99%