Debt Intolerance
Fiscal vulnerabilities depend on both the level and composition of government debt. This study examines the role of debt thresholds and debt composition in driving the non-linear behavior of long-term interest rates through a novel approach, a panel smooth transition regression with a general logistic model. The main findings are threefold. First, the impact of the expected public debt level on interest rates rises exponentially when the share of foreign private holdings exceeds approximately 20 percent of government debt denominated in local currency. Second, when the share of foreign private investors is 30 percent, an increase in the share of foreign private holdings of government debt could raise long-term interest rates once the public debt-to-GDP ratio exceeds 60 percent of GDP, offsetting the downward pressure on long-term interest rates from higher market liquidity. Third, out-of-sample forecasts of this novel non-linear model are more accurate than those of previous methods.
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Format: | Working Paper biblioteca |
Language: | English |
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World Bank, Washington, DC
2020-06
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Subjects: | PUBLIC DEBT, GENERALIZED PANEL SMOOTH TRANSITION REGRESSION, DEBT SERVICE BURDEN, DEBT RATIO, PRIVATE INVESTMENT, LONG-TERM INTEREST RATE, DEBT COMPOSITION, |
Online Access: | http://documents.worldbank.org/curated/en/634991591901999238/Debt-Intolerance-Threshold-Level-and-Composition https://hdl.handle.net/10986/33906 |
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dig-okr-10986339062024-07-28T06:07:57Z Debt Intolerance Threshold Level and Composition Matsuoka, Hideaki PUBLIC DEBT GENERALIZED PANEL SMOOTH TRANSITION REGRESSION DEBT SERVICE BURDEN DEBT RATIO PRIVATE INVESTMENT LONG-TERM INTEREST RATE DEBT COMPOSITION Fiscal vulnerabilities depend on both the level and composition of government debt. This study examines the role of debt thresholds and debt composition in driving the non-linear behavior of long-term interest rates through a novel approach, a panel smooth transition regression with a general logistic model. The main findings are threefold. First, the impact of the expected public debt level on interest rates rises exponentially when the share of foreign private holdings exceeds approximately 20 percent of government debt denominated in local currency. Second, when the share of foreign private investors is 30 percent, an increase in the share of foreign private holdings of government debt could raise long-term interest rates once the public debt-to-GDP ratio exceeds 60 percent of GDP, offsetting the downward pressure on long-term interest rates from higher market liquidity. Third, out-of-sample forecasts of this novel non-linear model are more accurate than those of previous methods. 2020-06-15T14:37:00Z 2020-06-15T14:37:00Z 2020-06 Working Paper Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/634991591901999238/Debt-Intolerance-Threshold-Level-and-Composition https://hdl.handle.net/10986/33906 English Policy Research Working Paper;No. 9276 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank application/pdf text/plain World Bank, Washington, DC |
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Estados Unidos |
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US |
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biblioteca |
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America del Norte |
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Biblioteca del Banco Mundial |
language |
English |
topic |
PUBLIC DEBT GENERALIZED PANEL SMOOTH TRANSITION REGRESSION DEBT SERVICE BURDEN DEBT RATIO PRIVATE INVESTMENT LONG-TERM INTEREST RATE DEBT COMPOSITION PUBLIC DEBT GENERALIZED PANEL SMOOTH TRANSITION REGRESSION DEBT SERVICE BURDEN DEBT RATIO PRIVATE INVESTMENT LONG-TERM INTEREST RATE DEBT COMPOSITION |
spellingShingle |
PUBLIC DEBT GENERALIZED PANEL SMOOTH TRANSITION REGRESSION DEBT SERVICE BURDEN DEBT RATIO PRIVATE INVESTMENT LONG-TERM INTEREST RATE DEBT COMPOSITION PUBLIC DEBT GENERALIZED PANEL SMOOTH TRANSITION REGRESSION DEBT SERVICE BURDEN DEBT RATIO PRIVATE INVESTMENT LONG-TERM INTEREST RATE DEBT COMPOSITION Matsuoka, Hideaki Debt Intolerance |
description |
Fiscal vulnerabilities depend on both
the level and composition of government debt. This study
examines the role of debt thresholds and debt composition in
driving the non-linear behavior of long-term interest rates
through a novel approach, a panel smooth transition
regression with a general logistic model. The main findings
are threefold. First, the impact of the expected public debt
level on interest rates rises exponentially when the share
of foreign private holdings exceeds approximately 20 percent
of government debt denominated in local currency. Second,
when the share of foreign private investors is 30 percent,
an increase in the share of foreign private holdings of
government debt could raise long-term interest rates once
the public debt-to-GDP ratio exceeds 60 percent of GDP,
offsetting the downward pressure on long-term interest rates
from higher market liquidity. Third, out-of-sample forecasts
of this novel non-linear model are more accurate than those
of previous methods. |
format |
Working Paper |
topic_facet |
PUBLIC DEBT GENERALIZED PANEL SMOOTH TRANSITION REGRESSION DEBT SERVICE BURDEN DEBT RATIO PRIVATE INVESTMENT LONG-TERM INTEREST RATE DEBT COMPOSITION |
author |
Matsuoka, Hideaki |
author_facet |
Matsuoka, Hideaki |
author_sort |
Matsuoka, Hideaki |
title |
Debt Intolerance |
title_short |
Debt Intolerance |
title_full |
Debt Intolerance |
title_fullStr |
Debt Intolerance |
title_full_unstemmed |
Debt Intolerance |
title_sort |
debt intolerance |
publisher |
World Bank, Washington, DC |
publishDate |
2020-06 |
url |
http://documents.worldbank.org/curated/en/634991591901999238/Debt-Intolerance-Threshold-Level-and-Composition https://hdl.handle.net/10986/33906 |
work_keys_str_mv |
AT matsuokahideaki debtintolerance AT matsuokahideaki thresholdlevelandcomposition |
_version_ |
1806032410061570048 |