A Simple Stochastic Approach to Debt Sustainability Applied to Lebanon
April 1, 2008
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Summary
This paper applies a simple probabilistic approach to debt sustainability analysis to the case of Lebanon. The paper derives "fan charts" to depict the probability distribution of the government debt to GDP ratio under a medium-term adjustment scenario, as a result of shocks to GDP growth and interest rates. The distribution of shocks is derived from the past shocks to these variables and the related variance covariance. Because we are interested in assessing the sustainability of a particular policy scenario, we do not consider independent fiscal policy shocks or the endogenous policy response to shocks.
Subject: Debt sustainability analysis, Deposit rates, Fiscal policy, Public debt, Real interest rates
Keywords: cost of funds, debt ratio, Eurobond rate, WP
Pages:
23
Volume:
2008
DOI:
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Issue:
097
Series:
Working Paper No. 2008/097
Stock No:
WPIEA2008097
ISBN:
9781451869583
ISSN:
1018-5941
