| By: |
Philippe D Karam;
Doug Hostland |
| Abstract: |
This paper documents the specification of a model that was constructed to
assess debt sustainability in emerging market economies. Key features of the
model include external and fiscal sectors, which allow assessment of external
and public debt in a unified framework; public and external debt, which both
have an explicit maturity structure along with a distinction between
denomination in domestic versus foreign currency to facilitate debt management
analysis; monetary and fiscal policy, which are endogenous and specified using
explicit forward-looking policy rules; an endogenous risk premium on public
and external debt; and a mechanism for invoking a sudden stop in private
capital flows. The paper provides an overview of the basic structure of the
model, outlines the methodology used to calibrate the parameters, and
illustrates the key properties of the model with reference to dynamic
responses of selected variables to shocks of interest. |
| Keywords: |
Debt sustainability , dynamic analysis , Monte Carlo simulations , Debt sustainability analysis , Emerging markets , Economic models , |
| Date: |
2006–12–07 |
| URL: |
http://d.repec.org/n?u=RePEc:imf:imfwpa:06/268&r=ict |