Social development and public debt sustainability

Sustainability of Public Debt

The Sustainability of Public Debt in Taiwan

This study examines whether the Taiwan’s public debt is sustainable utilizing an unrestricted two-regime threshold autoregressive (TAR) model with an autoregressive unit root. The empirical results show that Taiwan’s public debt appears as a nonlinear series and is stationary in regime 1 but not in regime 2. This result implies that while Taiwan’s public debt was mostly sustainable over the 199...

Sustainability of US public debt: Estimating smoothing spline regressions

In this paper we analyze how the primary surplus to GDP ratio in the US reacts to variations in the public debt-GDP ratio. In contrast to earlier studies we perform non-parametric and semi-parametric estimations. Our results show that the response of the primary surplus to GDP ratio is a positive nonlinear function of the debt-GDP ratio. Further, our estimations demonstrate that the coefficient...

Collateral, liquidity and debt sustainability

We study the sustainability of public debt in a closed production economy where a benevolent government chooses fiscal policies, including haircuts on its outstanding debt, in a discretionary manner. Government bonds are held by domestic agents to smooth consumption over time and because they provide collateral and liquidity services. We characterize a recursive equilibrium where public debt am...

A Note on Social Security and Public Debt

In a simple stochastic overlapping generation model, individuals work when young and retire when old, generations’ productivity is affected by a serially uncorrelated random shock, and fiat money and nominal public debt are the only storable assets. In this setting, we show that social security programs featured by a constant contribution rate and budget-balance in each period, as common in the...