An Application of the "Fan-Chart Approach" to Debt Sustainability in Post-HIPC Low-Income Countries

Author/Editor:

Chris Geiregat ; Mariusz A. Sumlinski ; Maximilien Kaffo Melou

Publication Date:

June 11, 2014

Electronic Access:

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Summary:

We analyse the debt dynamics in countries that benefited from the HIPC/MDRI debt relief initiatives with a view to applying a probabilistic approach to estimating future debt paths for those countries. We extend the probabilistic approach to public debt sustainability analysis (DSA) proposed by Celasun et al. (2006). This required addressing the twin challenges of a the time period that is too short to conduct country-by-country estimations and the presence, suggested by econometric evidence, of a break–point around 2006 in the dynamics of debt accumulation. To overcome the data limitations, we pool the data and estimate a panel VAR, thus taking advantage of the large cross–section. To account for the break–point, while applying a probabilistic approach to forecasting debt paths, we use the post–break–point information so as not to bias the forecasts of debt paths. As an illustration of the approach we apply the methodology to eight countries with different debt profiles.

Series:

Working Paper No. 14/102

Subject:

English

Publication Date:

June 11, 2014

ISBN/ISSN:

9781498345033/1018-5941

Stock No:

WPIEA2014102

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

25

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