A Debt Intolerance Framework Applied to Central America, Panama and the Dominican Republic
IMF Working Papers, September 1, 2011
Source details
- Canonical URL
- A Debt Intolerance Framework Applied to Central America, Panama and the Dominican Republic
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Bibliographic details
- Authors: Geoffrey J Bannister, Luis D Barrot
- Published: September 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463904227.001
Study scope and methodology
- Authors: Geoffrey J Bannister, Luis D Barrot
- Publication date: September 1, 2011
- Series: Working Paper No. 2011/220
- Issue: 220
- Volume: 2011
- Pages: 23
- DOI: https://doi.org/10.5089/9781463904227.001
- ISBN: 9781463904227
- ISSN: 1018-5941
- Core methodological contributions:
- Presents an alternative method for calculating debt targets using the debt intolerance literature of Reinhart, Rogoff, and Savastano (2003) and Reinhart and Rogoff (2009).
- Uses a dynamic panel approach.
- Corrects for endogeneity in the regressors.
- Bases the calculation of debt targets on credit ratings as a more objective criterion.
- Employs a new database on general government debt covering 120 countries over 21 years.
Key findings and analytical results
- The paper suggests a ranking of Central America, Panama, and Dominican Republic (CAPDR) countries in terms of debt intolerance.
- Introduces an index (debt intolerance index) which could be used to further investigate the main components of debt intolerance.
- Emphasizes credit ratings as the objective basis for calculating debt targets within the proposed framework.
Subject areas and keywords
- Subject: Credit ratings, Econometric analysis, Estimation techniques, External debt, Fiscal policy, Inflation, Money, Public debt
- Keywords: CAPDR, Central America, Credit ratings, Debt, debt intolerance, Dominican Republic, estimate, Estimation techniques, IIR grouping, IIR target, intolerance equation, Panama, target IIR, threshold IIR level, WP
Implications and potential uses
- The proposed debt intolerance index can be employed to:
- Rank CAPDR countries by vulnerability to debt intolerance.
- Guide deeper investigation into determinants of debt intolerance across countries.
- Methodology improvements (dynamic panel, endogeneity correction, use of credit ratings) aim to produce more objective and robust debt targets than earlier literature.
Source: IMF Working Paper "A Debt Intolerance Framework Applied to Central America, Panama and the Dominican Republic" by Geoffrey J Bannister and Luis D Barrot (Working Paper No. 2011/220, September 1, 2011).