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An Application of the "Fan-Chart Approach" to Debt Sustainability in Post-HIPC Low-Income Countries, Maximilien Kaffo Melou, Mariusz Sumlinski, Chris Geiregat

We analyse the debt dynamics in countries that benefited from the HIPC/MDRI debt relief initiatives with a view to applying a probabilistic approach to estimating future debt paths for those countries. We extend the probabilistic approach to public debt sustainability analysis (DSA) proposed by Celasun et al. (2006). This required addressing the twin challenges of a the time period that is too short to conduct country-by-country estimations and the presence, suggested by econometric evidence, of a break–point around 2006 in the dynamics of debt accumulation. To overcome the data limitations, we pool the data and estimate a panel VAR, thus taking advantage of the large cross–section. To account for the break–point, while applying a probabilistic approach to forecasting debt paths, we use the post–break–point information so as not to bias the forecasts of debt paths. As an illustration of the approach we apply the methodology to eight countries with different debt profiles
Table Of Contents
Cover; Abstract; Contents; I. Introduction; II. Trends and composition of Public debt in HIPCs; Figures; 1. Average Public Debt for 33 HIPCs; 2. Public Debt in HIPCs 2001, 2006, and 2011; 3. Change in total Public Debt for 33 HIPCs; III. Overview of the methodology; IV. Estimation results; A. PVARX estimation; B. Fiscal reaction function estimation; Tables; 1. Results of the estimation of the fiscal reaction function; V. Putting it all together; A. Fan Charts Forecasts; B. Probabilistic Debt Sustainability Index; 4. Fan Charts of Public Debt-to-GDP in Selected HIPCs
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (26 p.)
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Form Of Item

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