IMF Working Papers

Government Financial Assets and Debt Sustainability

By Camila Henao Arbelaez, Nelson Sobrinho

July 25, 2017

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Camila Henao Arbelaez, and Nelson Sobrinho. Government Financial Assets and Debt Sustainability, (USA: International Monetary Fund, 2017) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Do government financial assets help improve public debt sustainability? To answer this question, we assemble a comprehensive dataset on government assets using multiple sources and covering 110 advanced and emerging market economies since the late 1980s. We then use this rich database to estimate the impact of assets on two key dimensions of debt sustainability: borrowing costs and the probability of debt distress. Government financial assets significantly reduce sovereign spreads and the probability of debt crises in emerging economies but not in advanced economies, and the effect varies with asset characteristics, notably liquidity. Government finacial assets also help discriminate countries across the distribution of sovereign spreads, thus signaling information about emerging economies’ creditworthiness.

Subject: Debt default, Debt sustainability, External debt, Financial crises, Financial institutions, Public debt, Securities

Keywords: Asset category, Asset holding, Debt crisis, Debt default, Debt distress, Debt Sustainability, Default, Global, Government assets, Government Financial Assets, Gross debt, Securities, Sovereign Risk, WP, X EM

Publication Details

  • Pages:

    41

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2017/173

  • Stock No:

    WPIEA2017173

  • ISBN:

    9781484311059

  • ISSN:

    1018-5941

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