External Conditions and Debt Sustainability in Latin America

January 30, 2013

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Gustavo Adler, and Sebastian Sosa. External Conditions and Debt Sustainability in Latin America, (USA: International Monetary Fund, 2013) accessed December 3, 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

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.

Subject: Debt sustainability, Debt sustainability analysis, External debt, Fiscal policy, Fiscal stance, Public debt

Keywords: Commodity revenue, Debt level, Debt motion equation, Debt sustainability, Debt sustainability analysis, Debt trajectory, External debt, Financing flow, Fiscal stance, Global, Latin America, Motion equation, Potential GDP, Public debt, Public debt debt ratio, Sustainability indicator, WP

Publication Details

Pages:

51
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/027
Stock No:

WPIEA2013027
ISBN:

9781475588835
ISSN:

1018-5941

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