Public Debt Dynamics and Sustainability: A Framework for Analysis

• Autores: Mendoza, Waldo, Razzo, Marko, Vilca, Rafael
• Formato: documento de trabajo
• Fecha de Publicación: 2024
• Institución: Pontificia Universidad Católica del Perú
• Repositorio: PUCP-Institucional
• Lenguaje: inglés
• OAI Identifier: oai:repositorio.pucp.edu.pe:20.500.14657/202934
• Enlace del recurso: https://repositorio.pucp.edu.pe/handle/123456789/202934; http://doi.org/10.18800/2079-8474.0541
• Nivel de acceso: acceso abierto
• Materia: Debt; Dynamic; Sustainability; Fiscal Adjustment; https://purl.org/pe-repo/ocde/ford#5.02.01

This paper presents a macro-fiscal model for examining the public sector primary surplus and the dynamics and sustainability of public debt in closed and open economies. The model simulates how changes in the primary surplus affect public debt, highlighting key differences between these economic contexts. Notably, open economies can finance fiscal deficits with foreign currency-denominated debt, introducing additional sources of instability in public debt dynamics. The analysis demonstrates how a permanent reduction in the primary surplus undermines public debt sustainability, with outcomes shaped by economic conditions and the features of open and closed economies. Furthermore, it confirms that delays in implementing fiscal adjustments following a destabilizing shock result in increasingly severe corrective measures over time.