The Blind Side of Public Debt Spikes

By Laura Jaramillo, Carlos Mulas-Granados, Elijah Kimani

October 14, 2016

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Laura Jaramillo, Carlos Mulas-Granados, and Elijah Kimani. The Blind Side of Public Debt Spikes, (USA: International Monetary Fund, 2016) accessed November 21, 2024

Disclaimer: 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

Summary

What explains public debt spikes since the end of WWII? To answer this question, this paper identifies 179 debt spike episodes from 1945 to 2014 across advanced and developing countries. We find that debt spikes are not rare events and their probability increases with time. We then show that large public debt spikes are neither driven by high primary deficits nor by output declines but instead by sizable stock-flow adjustments (SFAs). We also find that SFAs are poorly forecasted, which can affect debt sustainability analyses, and are associated with a higher probability of suffering non-declining debt paths in the aftermath of public debt spikes.

Subject: Contingent liabilities, Debt sustainability analysis, External debt, Government debt management, Inflation, Prices, Public debt, Public financial management (PFM)

Keywords: Contingent liabilities, Debt accumulation, Debt decomposition analysis, Debt decrease, Debt forecast, Debt Forecasting, Debt spike, Debt Spikes, Debt sustainability analysis, General government debt, Global, Government debt management, Inflation, Path syndrome, Public Debt, SFA, SFA component, Spike episode, Stock Flow Adjsutment, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/202
Stock No:

WPIEA2016202
ISBN:

9781475545043
ISSN:

1018-5941

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