## Government Financial Assets and Debt Sustainability

_IMF Working Papers, July 25, 2017_

## Source details

**Canonical URL:** [Government Financial Assets and Debt Sustainability](https://www.imf.org/en/publications/wp/issues/2017/07/25/government-financial-assets-and-debt-sustainability-45103)

## Other formats

- [Markdown version](/en/publications/wp/issues/2017/07/25/government-financial-assets-and-debt-sustainability-45103/index.md)
- [Structured JSON version](/en/publications/wp/issues/2017/07/25/government-financial-assets-and-debt-sustainability-45103/index.json)
- [Bundle manifest](/en/publications/wp/issues/2017/07/25/government-financial-assets-and-debt-sustainability-45103/bundle-manifest.json)

## Bibliographic details
- Authors: Camila Henao Arbelaez, Nelson Sobrinho
- Published: July 25, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484311059.001

---

### Research question and dataset
- 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.

### Method and analytical focus
- Estimation target: impact of government financial assets on two key dimensions of debt sustainability:
  - borrowing costs (sovereign spreads)
  - probability of debt distress (debt crises)
- Empirical emphasis on variation by asset characteristics, notably liquidity.

### Key findings
- 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.

### Policy implications and interpretation
- 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.

---

## Content in this bundle

- **Government Financial Assets and Debt Sustainability, WP/17/173, July 2017**
  - [Government Financial Assets and Debt Sustainability, WP/17/173, July 2017 (Markdown version)](/-/media/files/publications/wp/2017/wp17173.pdf.md){rel="alternate" type="text/markdown"}
  - [Government Financial Assets and Debt Sustainability, WP/17/173, July 2017 (PDF)](/-/media/files/publications/wp/2017/wp17173.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2017/07/25/government-financial-assets-and-debt-sustainability-45103_