Empirical Assessment of Sustainability and Feasibility of Government Debt: The Philippines Case

Publication | February 2005

This paper finds the Philippine government debt not sustainable but weakly feasible, making it vulnerable to major adverse shocks. Simple budgetary deficit control policy is inadequate to achieve sustainability or strengthen feasibility.

This paper assesses empirically the sustainability and feasibility of the government debt in the Philippines using the No Ponzi Game criterion. Both historical data and forecasts generated by a quarterly macroeconometric model of the Philippines are used in the assessment. Stochastic simulations are carried out to mimic future uncertainty. The test results show that, up to the end of the present administration in 2010, the Philippine government debt is not sustainable but weakly feasible, that the feasibility is vulnerable to major adverse shocks, and that simple budgetary deficit control policy is inadequate for achieving debt sustainability or strengthening feasibility.

Contents 

  • Abstract
  • Introduction
  • The Fiscal and Government Debt Situation in the Philippines
  • Theories of Government Debt Sustainability and Feasibility
  • Empirical Tests of Government Debt Sustainability and Feasibility
  • Conclusions
  • Appendix: Data Description and Sources
  • References

Additional Details

Authors
Type
Series
Subjects
  • Economics
  • Finance sector development
  • Governance and public sector management
Countries
  • Philippines
ISSN
  • 1655-5252 (Print)

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