This article surveys the literature on sovereign debt sustainability from its origins in the mid-1980s to the present, focusing on four debates. First, the shift from an "accounting based" view of debt sustainability, evaluated using government borrowing rates, to a "model based" view which uses...

Although the Netherlands entered the so-called Great Lockdown with a strong fiscal position, the Dutch fiscal balance is projected to deteriorate by an unprecedented magnitude, largely as a result of necessary fiscal measures deployed to weather the economic impact of the COVID-19 pandemic. This...

The pandemic has urged countries around the globe to mobilize financing to support the recovery. This is even more relevant in Central America, where the policy response to cushion the pandemic's economic and social impact has accentuated pre-existing debt vulnerabilities. This paper documents...

Sovereign debt crises are difficult to solve. This paper studies the "holdout problem", meaning the risk that creditors refuse to participate in a debt restructuring. We document a large variation in holdout rates, based on a comprehensive new dataset of 23 bond restructurings with external...

Using a quantitative sovereign default model, we characterize constrained efficient borrowing by a Ramsey government that commits to income-history-contingent borrowing paths taking as given ex-post optimal future default decisions. The Ramsey government improves upon the Markov government...

This paper discusses the Heavily Indebted Poor Countries (HIPC) Initiative in the perspective of sizable historical debt relief and large positive net resource flows to HIPCs. It argues that, by substantially reducing HIPCs’ debt stocks and debt service payments, the Initiative provides a...

Do Highly Indebted Poor Countries (HIPCs) suffer from a debt overhang? Is debt relief going to improve their growth rates? To answer these important questions, we look at how the debt-growth relationship varies with indebtedness levels and other country characteristics in a panel of developing...

This paper looks at the link between fiscal policy and debt sustainability in a number of African countries participating in the Heavily Indebted Poor Countries (HIPC) Initiative. The paper finds that, on the basis of current fiscal policies, debt levels will remain unsustainable even after...