Assessing Debt Sustainability in Emerging Market Economies : Using Stochastic Simulation Methods

The authors apply stochastic simulation methods to assess debt sustainability in emerging market economies and provide probability measures for projections of the external and public debt burden over the medium term. The vulnerability of public debt to adverse shocks is determined by a number of int...

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Main Authors:	Hostland, Doug, Karam, Philippe
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ADVANCED COUNTRIES ADVERSE SHOCKS AGGREGATE DEMAND ASSET PRICES AUTOREGRESSION BENCHMARK BONDS BORROWING BUSINESS CYCLE CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKETS CREDIT RATING CREDITORS CURRENCY CRISES CURRENT ACCOUNT CURRENT ACCOUNT ADJUSTMENTS CURRENT ACCOUNT BALANCE CURRENT ACCOUNT BALANCES CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT REVERSALS DEBT DEBT BURDEN DEBT BURDENS DEBT CRISIS DEBT DEFAULT DEBT DYNAMICS DEBT INTOLERANCE DEBT LEVEL DEBT MANAGEMENT DEBT MARKETS DEBT OBLIGATIONS DEBT RESCHEDULING DEBT SERVICE DEBT SERVICE BURDEN DEBT SERVICE PAYMENTS DEBT STOCKS DEBT SUSTAINABILITY DEBTOR DEBTOR REPORTING DEBTOR REPORTING SYSTEM DEBTORS DEFAULT RISK DEFAULTS DEVALUATION DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISCOUNTED VALUE DISTORTIONARY TAXES DOMESTIC CURRENCY DOMESTIC DEBT ECONOMIC GROWTH ECONOMIC OUTCOMES ECONOMIC OUTLOOK ECONOMIC STRUCTURE EMERGING MARKET ECONOMIES EMPIRICAL EVIDENCE EMPIRICAL STUDIES ENDOGENOUS VARIABLES EXCHANGE RATE EXCHANGE RATE DEPRECIATION EXCHANGE RATES EXPORTS EXTERNAL DEBT EXTERNAL DEBT BURDEN FINANCIAL CRISES FINANCIAL FRAGILITY FISCAL POLICY FOREIGN CURRENCY FUTURE RESEARCH GDP GROWTH RATE INCOME INFLATION INFLATION TARGETING INTEREST RATE INTEREST RATES INTERNATIONAL FINANCE LIQUIDITY LIQUIDITY CRISES LOCAL CURRENCY LONG TERM LOW-INCOME COUNTRIES MACRO MODELS MACRO POLICIES MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC VOLATILITY MATURITY STRUCTURE OF DEBT MIDDLE INCOME COUNTRIES MIDDLE-INCOME COUNTRIES MONETARY POLICY NOMINAL INTEREST RATE OPEN ECONOMIES OPEN ECONOMY OUTPUT GROWTH OUTPUT VOLATILITY POLICY INSTRUMENTS POLICY RESEARCH PRIMARY SURPLUS PRIVATE SECTOR PUBLIC DEBT REAL EXCHANGE REAL GDP REAL INTEREST REAL INTEREST RATE REFINANCE RESERVE MANAGEMENT RISK PREMIUM SERIAL DEFAULTERS SOLVENCY SOVEREIGN DEBT STABLE INFLATION STANDARD DEVIATION STATISTICAL ANALYSIS STRUCTURAL REFORMS TAX REVENUES TRADE BALANCE TRADE SHOCKS
Online Access:	http://documents.worldbank.org/curated/en/2006/01/6534214/assessing-debt-sustainability-emerging-market-economies-using-stochastic-simulation-methods http://hdl.handle.net/10986/8800

id	okr-10986-8800
recordtype	oai_dc
spelling	okr-10986-88002021-04-23T14:02:40Z Assessing Debt Sustainability in Emerging Market Economies : Using Stochastic Simulation Methods Hostland, Doug Karam, Philippe ACCOUNTING ADVANCED COUNTRIES ADVERSE SHOCKS AGGREGATE DEMAND ASSET PRICES AUTOREGRESSION BENCHMARK BONDS BORROWING BUSINESS CYCLE CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKETS CREDIT RATING CREDITORS CURRENCY CRISES CURRENT ACCOUNT CURRENT ACCOUNT ADJUSTMENTS CURRENT ACCOUNT BALANCE CURRENT ACCOUNT BALANCES CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT REVERSALS DEBT DEBT BURDEN DEBT BURDENS DEBT CRISIS DEBT DEFAULT DEBT DYNAMICS DEBT INTOLERANCE DEBT LEVEL DEBT MANAGEMENT DEBT MARKETS DEBT OBLIGATIONS DEBT RESCHEDULING DEBT SERVICE DEBT SERVICE BURDEN DEBT SERVICE PAYMENTS DEBT STOCKS DEBT SUSTAINABILITY DEBTOR DEBTOR REPORTING DEBTOR REPORTING SYSTEM DEBTORS DEFAULT RISK DEFAULTS DEVALUATION DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISCOUNTED VALUE DISTORTIONARY TAXES DOMESTIC CURRENCY DOMESTIC DEBT ECONOMIC GROWTH ECONOMIC OUTCOMES ECONOMIC OUTLOOK ECONOMIC STRUCTURE EMERGING MARKET ECONOMIES EMPIRICAL EVIDENCE EMPIRICAL STUDIES ENDOGENOUS VARIABLES EXCHANGE RATE EXCHANGE RATE DEPRECIATION EXCHANGE RATES EXPORTS EXTERNAL DEBT EXTERNAL DEBT BURDEN FINANCIAL CRISES FINANCIAL FRAGILITY FISCAL POLICY FOREIGN CURRENCY FUTURE RESEARCH GDP GROWTH RATE INCOME INFLATION INFLATION TARGETING INTEREST RATE INTEREST RATES INTERNATIONAL FINANCE LIQUIDITY LIQUIDITY CRISES LOCAL CURRENCY LONG TERM LOW-INCOME COUNTRIES MACRO MODELS MACRO POLICIES MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC VOLATILITY MATURITY STRUCTURE OF DEBT MIDDLE INCOME COUNTRIES MIDDLE-INCOME COUNTRIES MONETARY POLICY NOMINAL INTEREST RATE OPEN ECONOMIES OPEN ECONOMY OUTPUT GROWTH OUTPUT VOLATILITY POLICY INSTRUMENTS POLICY RESEARCH PRIMARY SURPLUS PRIVATE SECTOR PUBLIC DEBT REAL EXCHANGE REAL GDP REAL INTEREST REAL INTEREST RATE REFINANCE RESERVE MANAGEMENT RISK PREMIUM SERIAL DEFAULTERS SOLVENCY SOVEREIGN DEBT STABLE INFLATION STANDARD DEVIATION STATISTICAL ANALYSIS STRUCTURAL REFORMS TAX REVENUES TRADE BALANCE TRADE SHOCKS The authors apply stochastic simulation methods to assess debt sustainability in emerging market economies and provide probability measures for projections of the external and public debt burden over the medium term. The vulnerability of public debt to adverse shocks is determined by a number of interrelated factors, including the volatility of output, financial fragility, the endogenous response of the risk premium, and sudden stops in private capital flows. The vulnerability of external debt is sensitive to the determination of the exchange rate and to the pricing of traded goods. The authors show that fiscal policy can act in a preemptive manner to prevent the debt burden from rising significantly over the medium term. This requires flexibility in fiscal planning, which many emerging market economies lack. Emerging market economies therefore face a difficult tradeoff between managing the risk of a debt crisis and pursuing other important fiscal policy objectives. 2012-06-22T16:43:42Z 2012-06-22T16:43:42Z 2006-01 http://documents.worldbank.org/curated/en/2006/01/6534214/assessing-debt-sustainability-emerging-market-economies-using-stochastic-simulation-methods http://hdl.handle.net/10986/8800 English Policy Research Working Paper; No. 3821 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTING ADVANCED COUNTRIES ADVERSE SHOCKS AGGREGATE DEMAND ASSET PRICES AUTOREGRESSION BENCHMARK BONDS BORROWING BUSINESS CYCLE CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKETS CREDIT RATING CREDITORS CURRENCY CRISES CURRENT ACCOUNT CURRENT ACCOUNT ADJUSTMENTS CURRENT ACCOUNT BALANCE CURRENT ACCOUNT BALANCES CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT REVERSALS DEBT DEBT BURDEN DEBT BURDENS DEBT CRISIS DEBT DEFAULT DEBT DYNAMICS DEBT INTOLERANCE DEBT LEVEL DEBT MANAGEMENT DEBT MARKETS DEBT OBLIGATIONS DEBT RESCHEDULING DEBT SERVICE DEBT SERVICE BURDEN DEBT SERVICE PAYMENTS DEBT STOCKS DEBT SUSTAINABILITY DEBTOR DEBTOR REPORTING DEBTOR REPORTING SYSTEM DEBTORS DEFAULT RISK DEFAULTS DEVALUATION DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISCOUNTED VALUE DISTORTIONARY TAXES DOMESTIC CURRENCY DOMESTIC DEBT ECONOMIC GROWTH ECONOMIC OUTCOMES ECONOMIC OUTLOOK ECONOMIC STRUCTURE EMERGING MARKET ECONOMIES EMPIRICAL EVIDENCE EMPIRICAL STUDIES ENDOGENOUS VARIABLES EXCHANGE RATE EXCHANGE RATE DEPRECIATION EXCHANGE RATES EXPORTS EXTERNAL DEBT EXTERNAL DEBT BURDEN FINANCIAL CRISES FINANCIAL FRAGILITY FISCAL POLICY FOREIGN CURRENCY FUTURE RESEARCH GDP GROWTH RATE INCOME INFLATION INFLATION TARGETING INTEREST RATE INTEREST RATES INTERNATIONAL FINANCE LIQUIDITY LIQUIDITY CRISES LOCAL CURRENCY LONG TERM LOW-INCOME COUNTRIES MACRO MODELS MACRO POLICIES MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC VOLATILITY MATURITY STRUCTURE OF DEBT MIDDLE INCOME COUNTRIES MIDDLE-INCOME COUNTRIES MONETARY POLICY NOMINAL INTEREST RATE OPEN ECONOMIES OPEN ECONOMY OUTPUT GROWTH OUTPUT VOLATILITY POLICY INSTRUMENTS POLICY RESEARCH PRIMARY SURPLUS PRIVATE SECTOR PUBLIC DEBT REAL EXCHANGE REAL GDP REAL INTEREST REAL INTEREST RATE REFINANCE RESERVE MANAGEMENT RISK PREMIUM SERIAL DEFAULTERS SOLVENCY SOVEREIGN DEBT STABLE INFLATION STANDARD DEVIATION STATISTICAL ANALYSIS STRUCTURAL REFORMS TAX REVENUES TRADE BALANCE TRADE SHOCKS
spellingShingle	ACCOUNTING ADVANCED COUNTRIES ADVERSE SHOCKS AGGREGATE DEMAND ASSET PRICES AUTOREGRESSION BENCHMARK BONDS BORROWING BUSINESS CYCLE CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKETS CREDIT RATING CREDITORS CURRENCY CRISES CURRENT ACCOUNT CURRENT ACCOUNT ADJUSTMENTS CURRENT ACCOUNT BALANCE CURRENT ACCOUNT BALANCES CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT REVERSALS DEBT DEBT BURDEN DEBT BURDENS DEBT CRISIS DEBT DEFAULT DEBT DYNAMICS DEBT INTOLERANCE DEBT LEVEL DEBT MANAGEMENT DEBT MARKETS DEBT OBLIGATIONS DEBT RESCHEDULING DEBT SERVICE DEBT SERVICE BURDEN DEBT SERVICE PAYMENTS DEBT STOCKS DEBT SUSTAINABILITY DEBTOR DEBTOR REPORTING DEBTOR REPORTING SYSTEM DEBTORS DEFAULT RISK DEFAULTS DEVALUATION DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISCOUNTED VALUE DISTORTIONARY TAXES DOMESTIC CURRENCY DOMESTIC DEBT ECONOMIC GROWTH ECONOMIC OUTCOMES ECONOMIC OUTLOOK ECONOMIC STRUCTURE EMERGING MARKET ECONOMIES EMPIRICAL EVIDENCE EMPIRICAL STUDIES ENDOGENOUS VARIABLES EXCHANGE RATE EXCHANGE RATE DEPRECIATION EXCHANGE RATES EXPORTS EXTERNAL DEBT EXTERNAL DEBT BURDEN FINANCIAL CRISES FINANCIAL FRAGILITY FISCAL POLICY FOREIGN CURRENCY FUTURE RESEARCH GDP GROWTH RATE INCOME INFLATION INFLATION TARGETING INTEREST RATE INTEREST RATES INTERNATIONAL FINANCE LIQUIDITY LIQUIDITY CRISES LOCAL CURRENCY LONG TERM LOW-INCOME COUNTRIES MACRO MODELS MACRO POLICIES MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC VOLATILITY MATURITY STRUCTURE OF DEBT MIDDLE INCOME COUNTRIES MIDDLE-INCOME COUNTRIES MONETARY POLICY NOMINAL INTEREST RATE OPEN ECONOMIES OPEN ECONOMY OUTPUT GROWTH OUTPUT VOLATILITY POLICY INSTRUMENTS POLICY RESEARCH PRIMARY SURPLUS PRIVATE SECTOR PUBLIC DEBT REAL EXCHANGE REAL GDP REAL INTEREST REAL INTEREST RATE REFINANCE RESERVE MANAGEMENT RISK PREMIUM SERIAL DEFAULTERS SOLVENCY SOVEREIGN DEBT STABLE INFLATION STANDARD DEVIATION STATISTICAL ANALYSIS STRUCTURAL REFORMS TAX REVENUES TRADE BALANCE TRADE SHOCKS Hostland, Doug Karam, Philippe Assessing Debt Sustainability in Emerging Market Economies : Using Stochastic Simulation Methods
relation	Policy Research Working Paper; No. 3821
description	The authors apply stochastic simulation methods to assess debt sustainability in emerging market economies and provide probability measures for projections of the external and public debt burden over the medium term. The vulnerability of public debt to adverse shocks is determined by a number of interrelated factors, including the volatility of output, financial fragility, the endogenous response of the risk premium, and sudden stops in private capital flows. The vulnerability of external debt is sensitive to the determination of the exchange rate and to the pricing of traded goods. The authors show that fiscal policy can act in a preemptive manner to prevent the debt burden from rising significantly over the medium term. This requires flexibility in fiscal planning, which many emerging market economies lack. Emerging market economies therefore face a difficult tradeoff between managing the risk of a debt crisis and pursuing other important fiscal policy objectives.
format	Publications & Research :: Policy Research Working Paper
author	Hostland, Doug Karam, Philippe
author_facet	Hostland, Doug Karam, Philippe
author_sort	Hostland, Doug
title	Assessing Debt Sustainability in Emerging Market Economies : Using Stochastic Simulation Methods
title_short	Assessing Debt Sustainability in Emerging Market Economies : Using Stochastic Simulation Methods
title_full	Assessing Debt Sustainability in Emerging Market Economies : Using Stochastic Simulation Methods
title_fullStr	Assessing Debt Sustainability in Emerging Market Economies : Using Stochastic Simulation Methods
title_full_unstemmed	Assessing Debt Sustainability in Emerging Market Economies : Using Stochastic Simulation Methods
title_sort	assessing debt sustainability in emerging market economies : using stochastic simulation methods
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2006/01/6534214/assessing-debt-sustainability-emerging-market-economies-using-stochastic-simulation-methods http://hdl.handle.net/10986/8800
_version_	1764405709539115008

Assessing Debt Sustainability in Emerging Market Economies : Using Stochastic Simulation Methods

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