Debt-at-Risk

IMF Working Papers, May 5, 2025

Source details

Authors: Davide Furceri, Domenico Giannone, Faizaan Kisat, Waikei R Lam, Hongchi Li
Published: May 5, 2025
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798229010122.001

Proposes a novel framework for analyzing risks surrounding the public debt outlook called the “Debt-at-Risk.”
Employs a quantile panel regression framework to assess how current macrofinancial and political conditions impact the entire spectrum of possible future debt outcomes.
Replication code can be downloaded here.

Quantile panel regression framework used to estimate how macrofinancial and political variables affect different points of the future public debt distribution.
Focus on factors that predict both the expected level and the uncertainty of future debt.

Many factors—including financial conditions and economic variables such as initial debt and GDP growth—predict both the expected level and the uncertainty of future debt, implying pronounced variations in risks, especially in the upper tail of the distribution.
In a severely adverse scenario—the 95th percentile of the future debt distribution, or debt-at-risk—global public debt could be approximately 20 percentage points higher than currently projected.
The magnitudes and sources of debt risks vary over time and across countries.
High initial debt amplifies the effects of economic and financial conditions on debt-at-risk.
Empirical estimates indicate that debt-at-risk is a key variable for predicting fiscal crises.

Subject: Emerging and frontier financial markets, External debt, Financial institutions, Financial markets, Fiscal policy, Fiscal stance, Futures, Public debt
Keywords: Debt, debt distribution, debt risk, Emerging and frontier financial markets, Fiscal stance, Forecasts., Futures, Global, IMF working papers, macro-financial condition, public debt outlook, Risks