## Public Debt Targeting An Application to the Caribbean

_IMF Working Papers, August 1, 2011_

## Source details

**Canonical URL:** [Public Debt Targeting An Application to the Caribbean](https://www.imf.org/en/publications/wp/issues/2016/12/31/public-debt-targeting-an-application-to-the-caribbean-25184)

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## Bibliographic details
- Authors: Alejandro D Guerson, Giovanni Melina
- Published: August 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463902148.001

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### Overview of the proposed framework
- The paper proposes a fiscal policy framework called Public Debt Targeting.
- Objective: smooth primary spending over the business cycle while remaining consistent with public debt sustainability.
- Implementation mechanism:
  - Government announces a commitment to a public debt band trajectory over the medium term.
  - Government sequentially announces primary expenditures for the next budget cycle.
  - Primary expenditures are determined recursively based on the history of shocks.

### Key distinctions from existing approaches
- Public Debt Targeting differs from a structural balance rule by internalizing the effect of deterioration in creditworthiness from fiscal deficits and public debt accumulation.
- Channels affected by creditworthiness deterioration listed in the source:
  - sovereign spreads
  - interest rates
  - exchange rates
  - economic activity

### Application and empirical context
- The framework is applied to Caribbean economies.
- Empirical context from the source:
  - Caribbean economies "in general show high levels of public debt and procyclical primary expenditure."

### Main themes and analytical focus
- Budget planning and preparation
- Expenditure: envelope, growth, impulse, simulation, stance, vis-à-vis GDP
- Fiscal policy and fiscal stance
- Public debt and public debt sustainability
- Public financial management (PFM)
- Political economy considerations
- Interest expenditure, potential GDP, real GDP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/public-debt-targeting-an-application-to-the-caribbean-25184_