The Impact of Debt Sustainability and the Level of Debt on Emerging Markets Spreads

Belhocine, Nazim; Dell’Erba, Salvatore

doi:10.5089/9781484382769.001

Cited by 23 publications

(10 citation statements)

References 25 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…economies. Belhocine and Dell'Erba (2013) find that the sensitivity of spreads to debt sustainability doubles as public debt increases above 45 percent of GDP in EMEs. 18 Auerbach and Gorodnichenko (2013) is one of a few empirical studies that analyze the relative importance of the structural characteristics.…”

Section: A Main Stepsmentioning

confidence: 92%

Fiscal Multipliers: Size, Determinants, and Use in Macroeconomic Projections

Batini¹,

Eyraud²,

Forni³

et al. 2014

Technical Notes and Manuals

109

105

View full text Add to dashboard Cite

This note * addresses the following issues: • What are fiscal multipliers? • Why are multipliers important for macroeconomic projections and policy design? • What do we know about the size and persistence of multipliers? • What are the determinants of multipliers? • In countries where data availability limits the scope for empirical research, how to come up with multiplier estimates? • How to incorporate multipliers in macroeconomic projections? 1 This note refers to multipliers as one-year multipliers unless otherwise stated. In addition, all the following terms are synonyms: (exogenous) fiscal shock, fiscal impulse, and discretionary change in fiscal policy.

show abstract

Section: A Main Stepsmentioning

confidence: 92%

Fiscal Multipliers: Size, Determinants, and Use in Macroeconomic Projections

Batini¹,

Eyraud²,

Forni³

et al. 2014

Technical Notes and Manuals

109

105

View full text Add to dashboard Cite

show abstract

“…The Brady exchanges of the early 1990s created an active secondary market for emerging market sovereign bonds and sparked a large literature aimed at estimating the determinants of emerging market spreads (for a recent survey, see Belhocine and Dell'Erba, 2013 Aizenman, Jinjarak, and Park (2013) finds that the most important determinants of emerging market spreads in the precrisis periods were trade openness and state fragility. During the crisis period (2008-09), instead, spreads were closely associated with inflation and the external debt ratio, and in the post-crisis periods (2010-12) the main drivers of spreads were public debt and inflation.…”

Section: Debt and Spreadsmentioning

confidence: 99%

Debt levels, debt composition, and sovereign spreads in emerging and advanced economies

Dell’Erba¹,

Hausmann²,

Panizza³

2013

Oxford Review of Economic Policy

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper studies the relationship between sovereign spreads and the interaction between debt composition and debt levels in advanced and emerging market countries. It finds that in emerging market countries there is a significant correlation between spreads and debt levels. This correlation, however, is not statistically significant in countries where most public debt is denominated in local currency. In advanced economies, the magnitude of the correlation between debt levels and spreads is about one fifth of the corresponding correlation for emerging market economies. In Eurozone countries, however, the correlation between spreads and debt ratios is similar to that of emerging market countries. The paper also shows that the financial crisis amplified the relationship between spreads and debt levels within the Eurozone but had no effect on the relationship between spreads and debt in standalone countries. Finally, the paper shows that the relationship between debt levels and spreads is amplified by the presence of large net foreign liabilities. This amplifying effect of net foreign liabilities is larger in the Eurozone than in standalone advanced economies. The paper concludes that debt composition matters and corroborates the original sin hypothesis that, rather than being a mere reflection of institutional weaknesses, the presence of foreign currency debt increases financial fragility and leads to suboptimal macroeconomic policies.© The Authors. All rights reserved. No part of this paper may be reproduced without the permission of the authors. 1 Debt Levels, Debt Composition, and Sovereign Spreads in Emerging and Advanced EconomiesSalvatore Dell'Erba Ricardo Hausmann Ugo Panizza * AbstractThis paper studies the relationship between sovereign spreads and the interaction between debt composition and debt levels in advanced and emerging market countries. It finds that in emerging market countries there is a significant correlation between spreads and debt levels. This correlation, however, is not statistically significant in countries where most public debt is denominated in local currency. In advanced economies, the magnitude of the correlation between debt levels and spreads is about one fifth of the corresponding correlation for emerging market economies. In Eurozone countries, however, the correlation between spreads and debt ratios is similar to that of emerging market countries. The paper also shows that the fina...

show abstract

“… Ardagna and others (2007) andConway and Orr (2002) show that sovereign borrowing costs are much more sensitive to further changes in the debt-to-GDP ratio when public debt is above 100 percent of GDP in advanced economies Belhocine and Dell'Erba (2013). find that the sensitivity of spreads to debt sustainability doubles as public debt increases above 45 percent of GDP in EMEs.20 Auerbach and Gorodnichenko (2013) is one of a few empirical studies that analyze the relative importance of the structural characteristics.…”

mentioning

confidence: 99%

A Simple Method to Compute Fiscal Multipliers

Batini

Eyraud²,

Weber³

2014

IMF Working Papers

View full text Add to dashboard Cite

Fiscal multipliers are important tools for macroeconomic projections and policy design. In many countries, little is known about the size of multipliers, as data availability limits the scope for empirical research. For these countries, we propose a simple method-dubbed the "bucket approach"-to come up with reasonable multiplier estimates. The approach bunches countries into groups (or "buckets") with similar multiplier values, based on their characteristics. It also takes into account the effect of some temporary factors, such as the state of the business cycle.

show abstract

The Impact of Debt Sustainability and the Level of Debt on Emerging Markets Spreads

Cited by 23 publications

References 25 publications

Fiscal Multipliers: Size, Determinants, and Use in Macroeconomic Projections

Fiscal Multipliers: Size, Determinants, and Use in Macroeconomic Projections

Debt levels, debt composition, and sovereign spreads in emerging and advanced economies

A Simple Method to Compute Fiscal Multipliers

Contact Info

Product

Resources

About