Interest-Growth Differentials and Debt Limits in Advanced Economies /
Do persistently low nominal interest rates mean that governments can safely borrow more? To addresses this question, I extend the model of Ghosh and others [2013] to allow for persistent stochastic changes in nominal interest and growth rates. The key model parameter is the long-run difference betwe...
| المؤلف الرئيسي: | |
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| التنسيق: | دورية |
| اللغة: | English |
| منشور في: |
Washington, D.C. :
International Monetary Fund,
2018.
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| سلاسل: | IMF Working Papers; Working Paper ;
No. 2018/082 |
| الوصول للمادة أونلاين: | Full text available on IMF |
| الملخص: | Do persistently low nominal interest rates mean that governments can safely borrow more? To addresses this question, I extend the model of Ghosh and others [2013] to allow for persistent stochastic changes in nominal interest and growth rates. The key model parameter is the long-run difference between nominal interest and growth rates; if negative, maximum sustainable debts (debt limits) are unbounded. I show how both VAR- and spectral-based methods produce negative point estimates of this long-run differential, but cannot reject positive values at standard significance levels. I calibrate the model to the UK using positive but statistically plausible average interest-growth differentials. This produces debt limits which increase by only around 5% GDP as interest rates fall after 2008. In contrast, only a tiny change in the long-run average interest-growth differential - from the 95th to the 97.5th percentile of the distribution - is required to move average debt limits by the same amount. |
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| وصف المادة: | <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required |
| وصف مادي: | 1 online resource (55 pages) |
| التنسيق: | Mode of access: Internet |
| تدمد: | 1018-5941 |
| وصول: | Electronic access restricted to authorized BRAC University faculty, staff and students |