UID:
edoccha_9959301361102883
Format:
1 online resource (42 pages)
ISBN:
1-4843-1327-5
,
1-4843-1328-3
Series Statement:
IMF Working Papers
Content:
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.
Note:
Cover -- CONTENTS -- ABSTRACT -- I. INTRODUCTION -- II. LITERATURE REVIEW -- III. METHODOLOGY -- A. A Simple Economic Model -- B. Financial Assets and Sovereign Risk -- C. Financial Assets and Probability of Debt Distress -- IV. DATA -- A. Sample -- B. Descriptive Statistics -- V. RESULTS -- A. Financial Assets and Sovereign Spreads -- B. Robustness of the Results for Sovereign Spreads -- C. Financial Assets and Probability of Debt Distress -- D. Liquidity versus Solvency -- E. Robustness of the Results for the Probability of Debt Distress -- VI. ILLUSTRATIVE SIMULATIONS -- VII. CONCLUDING REMARKS -- VIII. REFERENCES -- APPENDIX -- A. Country Coverage -- B. Control Variables -- C. Asset Data-Government Balance Sheets -- D. Asset Data-WEO -- E. Quantile Regressions-Baseline Parameters -- F. Quantile Regressions-Robustness -- G. Panel OLS and Probit Regressions-Robustness -- TABLES -- Table 1. Net Debt and Baseline Controls: Descriptive Statistics, 1980-2015 -- Table 2. Asset Holdings by Category and Country Group, 1980-2015 (Percent of GDP) -- Table 3. Asset Holdings by Category and Instrument (Percent of GDP) -- Table 4. Pairwise Correlations, 1980-2015 -- Table 5. Triggers of Debt Crises in AMs and EMs, 1980-2015 -- Table 6. Panel OLS Fixed Effect Regressions (Dep. Variable: Bond Spreads, in bps) -- Table 7. Pooled Probit (Dependent Variable: Probability of Debt Distress) -- Table 8. Pooled Probit (Dep. Variable: Probability of Liquidity and Solvency Crises) -- FIGURES -- Figure 1. Description of Financial Asset Categories -- Figure 2. Asset Holdings Across Government Units and Asset Instruments -- Figure 3. Growth, Assets, Debt and Spreads during the GFC (Median) -- Figure 4. Commodity Prices and Equity Value of Commodity-Producing Firms -- Figure 5. Dynamics Around Debt Distress Episodes in EMs (Median).
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Figure 6. Marginal Effects on Spreads (left to right): Λ1(τ), β(τ), γ(τ), β(τ)+γ(τ) -- Figure 7. Counterfactual Asset Levels Conditional on Initial Gross Debt.
Additional Edition:
ISBN 1-4843-1105-1
Language:
English
