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Titel
How to test for debt sustainability? : some theoretical reflections on an empirical test / Alfred Greiner
VerfasserGreiner, Alfred
ErschienenBielefeld, Germany : Universität Bielefeld, Faculty of Business Administration and Economics, September 2013
Ausgabe
Elektronische Ressource
Umfang1 Online-Ressource (7 Seiten)
SerieWorking papers in economics and management ; No. 17-2013
SchlagwörterDebt Management / Bruttoinlandsprodukt / Zinsfuß
URNurn:nbn:de:hbz:6:2-128098 
DOI10.4119/unibi/2915423 
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How to test for debt sustainability? [0.11 mb]
Zusammenfassung

Testing the reaction of the primary surplus to variations in public debt, relative to GDP respectively, has been frequently resorted to in order to test for sustainabil- ity of a given debt policy. In this contribution, we analyze theoretically under which condition a positive reaction of the primary surplus to variations in debt implies a sustainable debt policy. We demonstrate that the evolution of the debt to GDP ratio plays a decisive role as concerns the validity of the test outcome. In addition, we demonstrate that a positive reaction coefficient does not guarantee sustainability unless it exceeds at least the difference between the interest rate on public debt and the GDP growth grate. Thus, this test allows judgements about sustainability of public debt policies only if the interest rate and the GDP growth rate are known.

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