Debt in emerging market and developing economies (EMDEs) is at its highest level in half a century. In about nine out of 10 EMDEs, debt is higher now than it was in 2010 and, in half of the EMDEs, debt is more than 30 percentage points of gross domestic product higher. Historically, elevated...

A windfall of natural resource revenue (or foreign aid) faces government with choices of how to manage public debt, investment, and the distribution of funds for consumption, particularly if the windfall is both anticipated and temporary. We show that the permanent income hypothesis prescription...

During the pandemic, public debt in Latin America and the Caribbean rose to more than 70 percent of GDP, and countries are now attempting to lower debt ratios. We analyze past debt reduction episodes and find inflation and the real interest rate were the most frequent main drivers, while higher...

During the pandemic, public debt in Latin America and the Caribbean rose to more than 70 percent of GDP, and countries are now attempting to lower debt ratios. We analyze past debt reduction episodes and find inflation and the real interest rate were the most frequent main drivers, while higher...

A windfall of natural resource revenue (or foreign aid) faces government with choices of how to manage public debt, investment, and the distribution of funds for consumption, particularly if the windfall is both anticipated and temporary. We show that the permanent income hypothesis prescription...

This paper studies how sovereign risk – both fundamental and self-fulfilling – shapes the cyclical behavior of optimalfiscal policy. We develop a model with endogenous default costs where market sentiment can induce belief-driven debt rollover crises. Optimal taxes and public spending are...

The euro area's sovereign debt crisis continues though significant steps have been taken to resolve it. This paper proposes a comprehensive solution to the crisis based on three pillars: a plan to restore banking sector soundness in the whole euro area, a resolution of sovereign debt crisis...

Unlike the crisis years of 2007-2009 (when the insolvency of large banks was a major problem), the current round of the global financial crisis has fiscal origins. Almost all developed countries suffer from an excessive public debt burden that has been built up over the last two decades or more....

The euro area's sovereign debt crisis continues though significant steps have been taken to resolve it. This paper proposes a comprehensive solution to the crisis based on three pillars: a plan to restore banking sector soundness in the whole euro area, a resolution of sovereign debt crisis...

The financial crisis and recession have left a legacy of unusually large fiscal deficits and growing sovereign debt levels in most advanced economies. The paper uses recent research from the IMF to throw light on two questions: how much fiscal space is available to advanced countries before they...