{
  "title": "Government Financial Assets and Debt Sustainability",
  "publication": "IMF Working Papers, July 25, 2017",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2017/07/25/government-financial-assets-and-debt-sustainability-45103",
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  "summary": "Do government financial assets help improve public debt sustainability? To answer this question, we assemble a comprehensive dataset on government assets using multiple sources and covering 110 advanced and emerging market economies since the late 1980s.",
  "sections": [
    {
      "heading": "Research question and dataset",
      "content": "- Research question: Do government financial assets help improve public debt sustainability?\n- Dataset: comprehensive dataset on government assets assembled from multiple sources covering 110 advanced and emerging market economies since the late 1980s.\n- Time span: since the late 1980s."
    },
    {
      "heading": "Method and analytical focus",
      "content": "- Estimation target: impact of government financial assets on two key dimensions of debt sustainability:\n  - borrowing costs (sovereign spreads)\n  - probability of debt distress (debt crises)\n- Empirical emphasis on variation by asset characteristics, notably liquidity."
    },
    {
      "heading": "Key findings",
      "content": "- Government financial assets significantly reduce sovereign spreads in emerging economies.\n- Government financial assets significantly reduce the probability of debt crises in emerging economies.\n- No significant reduction in sovereign spreads or probability of debt crises is found for advanced economies.\n- The effect of government financial assets varies with asset characteristics, notably liquidity.\n- Government financial assets help discriminate countries across the distribution of sovereign spreads, signaling information about emerging economies’ creditworthiness."
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- Government financial assets can serve as a buffer that lowers borrowing costs and distress probabilities for emerging economies, conditional on asset characteristics and liquidity.\n- For advanced economies, the presence of government financial assets does not exhibit the same stabilizing effect on spreads or crisis probability, suggesting different transmission mechanisms or already priced-in asset profiles.\n- Asset composition and liquidity should be considered when assessing the contribution of government financial assets to sovereign risk profiles.\n\n---\n\n Content in this bundle\n\n- Government Financial Assets and Debt Sustainability, WP/17/173, July 2017\n  - Government Financial Assets and Debt Sustainability, WP/17/173, July 2017 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Government Financial Assets and Debt Sustainability, WP/17/173, July 2017 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2017/07/25/government-financial-assets-and-debt-sustainability-45103"
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    "[Markdown version](/en/publications/wp/issues/2017/07/25/government-financial-assets-and-debt-sustainability-45103/index.md)",
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    "Authors: Camila Henao Arbelaez, Nelson Sobrinho",
    "Published: July 25, 2017",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484311059.001",
    "Research question: Do government financial assets help improve public debt sustainability?",
    "Dataset: comprehensive dataset on government assets assembled from multiple sources covering 110 advanced and emerging market economies since the late 1980s.",
    "Time span: since the late 1980s.",
    "Estimation target: impact of government financial assets on two key dimensions of debt sustainability:",
    "Empirical emphasis on variation by asset characteristics, notably liquidity.",
    "Government financial assets significantly reduce sovereign spreads in emerging economies.",
    "Government financial assets significantly reduce the probability of debt crises in emerging economies.",
    "No significant reduction in sovereign spreads or probability of debt crises is found for advanced economies.",
    "The effect of government financial assets varies with asset characteristics, notably liquidity.",
    "Government financial assets help discriminate countries across the distribution of sovereign spreads, signaling information about emerging economies’ creditworthiness.",
    "Government financial assets can serve as a buffer that lowers borrowing costs and distress probabilities for emerging economies, conditional on asset characteristics and liquidity.",
    "For advanced economies, the presence of government financial assets does not exhibit the same stabilizing effect on spreads or crisis probability, suggesting different transmission mechanisms or already priced-in asset profiles.",
    "Asset composition and liquidity should be considered when assessing the contribution of government financial assets to sovereign risk profiles.",
    "**Government Financial Assets and Debt Sustainability, WP/17/173, July 2017**"
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