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|z 9781484350980
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|a 1018-5941
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|a BD-DhAAL
|c BD-DhAAL
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|a Barrett, Philip.
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|a Interest-Growth Differentials and Debt Limits in Advanced Economies /
|c Philip Barrett.
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|a Washington, D.C. :
|b International Monetary Fund,
|c 2018.
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|a 1 online resource (55 pages)
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|a IMF Working Papers
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|a <strong>Off-Campus Access:</strong> No User ID or Password Required
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|a <strong>On-Campus Access:</strong> No User ID or Password Required
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|a Electronic access restricted to authorized BRAC University faculty, staff and students
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|a 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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|a Mode of access: Internet
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|a IMF Working Papers; Working Paper ;
|v No. 2018/082
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| 856 |
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|z Full text available on IMF
|u http://elibrary.imf.org/view/journals/001/2018/082/001.2018.issue-082-en.xml
|z IMF e-Library
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