2017年-PIIE彼得森国际经济研究所_A_New_Index_of_External_Debt_Sustainability_26页_484kb

Summary of "A New Index of External Debt Sustainability"

Core Content

This working paper introduces a new index of external debt sustainability that incorporates uncertainty into the assessment of whether a country's external debt is sustainable. Traditional measures of debt sustainability are deterministic, but the paper argues that in reality, sustainability must be treated as a probabilistic concept due to the uncertainty surrounding future net exports, growth, and rates of return.

The index is defined as the probability that, at the current exchange rate, net debt is equal to or less than the present value of net exports. This approach allows for a more nuanced and realistic evaluation of external debt sustainability.

Main Points

• Debt Sustainability is Probabilistic: The paper emphasizes that external debt is rarely sustainable with certainty. Therefore, the concept should be framed in terms of the probability that the debt can be sustained.

• Three Key Steps to Construct the Index:

  1. Derive the distribution of the present value of net exports at the current exchange rate.
  2. Derive the distribution of exchange rates that satisfy the sustainability condition.
  3. Assess the current exchange rate within the distribution to compute the probability of sustainability.

• Uncertainty in Forecasts: Future net exports, growth, and rates of return are uncertain. While the WEO provides mean forecasts, the paper uses historical data to estimate the higher moments of the distribution, enabling the use of stochastic simulations.

• Exchange Rate Impact: Exchange rates affect both the present value of net exports and the value of net debt. A depreciation can increase net exports and reduce net debt, potentially making the debt sustainable.

• Rate of Return Differentials: The paper highlights that different rates of return on assets and liabilities can significantly impact the sustainability condition. The US typically has a positive net return differential, which helps offset trade deficits.

• Capital Gains Matter: Including capital gains in the rate of return calculations increases the variability and uncertainty of the outcomes. This leads to a much wider distribution of present values and exchange rate adjustments.

• Empirical Application: The methodology is applied to the United States and Chile. For the US, under deterministic assumptions, a real depreciation of 9.2% would be required for sustainability. However, under uncertainty, the required adjustment becomes distributional, and the probability of sustainability is evaluated accordingly.

Key Information

• Forecast Period: The paper uses WEO forecasts for up to 5 years ahead to calculate the index. This period is chosen as it captures most of the cyclical variation in net exports.

• Variables Involved:

  • Net debt/GDP (d)
  • Net exports/GDP (nx)
  • Real GDP growth (g)
  • Rates of return on assets and liabilities (rA, rL)
  • Gross assets/GDP (a)

• Data and Forecast Trends:

  • US net debt is expected to rise from 44% to 52% of GDP by 2022.
  • Gross assets are forecast to increase from 129% to 165% of GDP.
  • Gross liabilities are forecast to rise from 172% to 217% of GDP.
  • Net exports remain negative, ranging from -3.8% to -4.2% of GDP.

• Exchange Rate Sensitivity:

  • A 10% real depreciation of the US dollar would reduce net debt by 7% of GDP.
  • It would increase net exports by 1.5% of GDP.
  • These effects are used to estimate the exchange rate adjustment needed for sustainability.

• VAR Modeling:

  • A vector autoregression (VAR) is used to model the joint dynamics of the variables.
  • The VAR includes real yields, capital gains, and exchange rates.
  • The correlation matrices of the innovations are used to simulate the distribution of outcomes.

• Impact of Capital Gains:

  • Including capital gains increases the standard deviation of the distribution of present values from 9% to 33%.
  • This reflects the larger uncertainty in future returns when capital gains are considered.

• Policy Implication:

  • The large uncertainty in future net exports and returns suggests that strong measures may be needed to reestablish sustainability.
  • Exchange rates that seem overvalued in the baseline may still imply a reasonably high probability of sustainability.
  • Conversely, undervalued exchange rates may not necessarily mean a high probability of unsustainability.

Conclusion

The paper concludes that the presence of large gross asset and liability positions, combined with uncertainty about future returns and net exports, implies a significant degree of uncertainty in the sustainability of external debt. The proposed index provides a more informative and robust measure of sustainability than traditional deterministic approaches, and it can be used by policy makers and international institutions like the IMF to assess external debt positions more accurately.

The methodology is flexible, relying on existing data and forecasts, and stochastic simulations to capture the distributional nature of uncertainty in the sustainability condition.