An Application of the "Fan-Chart Approach" to Debt Sustainability in Post-HIPC Low-Income Countries
IMF Working Papers, June 11, 2014
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Bibliographic details
- Authors: Maximilien Kaffo Melou, Mariusz A. Sumlinski, Chris Geiregat
- Published: June 11, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498345033.001
Summary of purpose and approach
- Objective: Analyse the debt dynamics in countries that benefited from the HIPC/MDRI debt relief initiatives and apply a probabilistic approach to estimating future debt paths for those countries.
- Methodological contribution: Extend the probabilistic approach to public debt sustainability analysis (DSA) proposed by Celasun et al. (2006).
- Key methodological choices:
- Pool the data and estimate a panel VAR to address the short time period that precludes country-by-country estimations and to leverage the large cross–section.
- Account for an econometrically suggested break–point around 2006 by using post–break–point information so as not to bias forecasts of debt paths.
- Illustrative application of the methodology to eight countries with different debt profiles.
Main findings and analytic implications
- Identification of a break–point:
- Econometric evidence suggests a break–point around 2006 in the dynamics of debt accumulation.
- Data limitation and estimation strategy:
- The time period is too short to conduct country-by-country estimations; pooling across countries and estimating a panel VAR addresses this limitation.
- Forecasting and probabilistic DSA:
- Use of post–break–point information within the probabilistic (fan-chart) framework to avoid bias in forecasting future debt paths.
- Empirical illustration:
- Methodology applied to eight countries with differing debt profiles (no country names provided in the source content).
Subjects and keywords (as listed)
- Subjects: Asset and liability management, Debt relief, Debt sustainability, Debt sustainability analysis, External debt, Fiscal policy, Fiscal stance, Public debt
- Keywords: Africa, coefficient estimate, confidence interval, Debt relief, Debt sustainability, Debt sustainability analysis, debt sustainablity, fan chart, Fiscal stance, Global, HIPC, MDRI, MDRI beneficiary, MDRI debt relief, output gap, panel data estimation methodology, WB baseline DSA forecast, WP
Publication and metadata
- Authors: Maximilien Kaffo Melou, Mariusz A. Sumlinski, Chris Geiregat
- Publication date: June 11, 2014
- Series: Working Paper No. 2014/102
- Issue: 102
- Volume: 2014
- Pages: 25
- DOI: https://doi.org/10.5089/9781498345033.001
- Stock No: WPIEA2014102
- ISBN: 9781498345033
- ISSN: 1018-5941
- Note: "This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate."
Source: IMF Working Paper "An Application of the "Fan-Chart Approach" to Debt Sustainability in Post-HIPC Low-Income Countries", Maximilien Kaffo Melou, Mariusz A. Sumlinski, Chris Geiregat, June 11, 2014, DOI https://doi.org/10.5089/9781498345033.001