How do financial markets respond to concerns over debt sustainability and the level of public debt in emerging markets? We introduce a measure of debt sustainability – the difference between the debt stabilizing primary balance and the primary balance – in an otherwise standard spread...

This study investigates the nonlinear relationship between public debt and sovereign credit ratings, using a wide sample of over one hundred advanced, emerging, and developing economies. It finds that: i) higher public debt lowers the probability of being placed in a higher rating category; ii)...

This paper tests empirically the theoretical prediction that the country premium paid by emerging economies on sovereign debt increases with the amount of debt up to a certain critical level, above which the supply of foreign funds becomes fixed. The results confirm this theoretical prediction....