Specification of a stochastic simulation model for assessing debt sustainability in emerging market economies
By: prepared by Doug Hostland and Philippe Karam.
Contributors: Karam, Philippe D.; International Monetary Fund.; IMF Institute.
Series: IMF working paper -- WP/06/268
Publisher: International Monetary Fund, IMF Institute
Published: 2006
Place of publication: [Washington, D.C.]
Language: eng
Number of pages: 33
Subjects: Debts, Public -- Developing countries -- Econometric models.; Developing countries -- Economic policy -- Econometric models.; Developing countries -- Economic conditions -- Econometric models.
Description: This paper documents the specification of a model that was constructed to assess debt sustainability in emerging market economies. Key features of the model include external and fiscal sectors, which allow assessment of external and public debt in a unified framework; public and external debt, which both have an explicit maturity structure along with a distinction between denomination in domestic versus foreign currency to facilitate debt management analysis; monetary and fiscal policy, which are endogenous and specified using explicit forward-looking policy rules; an endogenous risk premium on public and external debt; and a mechanism for invoking a sudden stop in private capital flows. The paper provides an overview of the basic structure of the model, outlines the methodology used to calibrate the parameters, and illustrates the key properties of the model with reference to dynamic responses of selected variables to shocks of interest.
Notes: Caption title.

"December 2006"

Includes bibliographical references (p. 32-33).

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