External Conditions and Debt Sustainability in Latin America

Author/Editor:

Gustavo Adler ; Sebastian Sosa

Publication Date:

January 30, 2013

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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:

Highly favorable external conditions have helped Latin America strengthen its economic fundamentals over the last decade. But, has the region built enough buffers to guard itself from a weakening of the external environment? This paper addresses this question by developing a simple framework that integrates econometric estimates of the effect of global factors on key domestic variables that determine public and external debt dynamics, with the IMF‘s standard debt sustainability framework. Results suggest that, while some countries in the region are well placed to withstand moderate or even large shocks, many would benefit from having stronger buffers to be in a position to deploy countercyclical policies, especially under tail events. External sustainability, on the other hand, does not appear to be a source of concern for most countries.

Series:

Working Paper No. 2013/027

Subject:

Debt sustainability Debt sustainability analysis External debt Fiscal policy Fiscal stance Public debt

English

Publication Date:

January 30, 2013

ISBN/ISSN:

9781475588835/1018-5941

Stock No:

WPIEA2013027

Pages:

51

Please address any questions about this title to publications@imf.org