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Vol. 94, No. 3
Posted 2012-05-01

An Application of Conventional Sovereign Debt Sustainability Analysis to the Current Debt Crises

The developing international debt crisis has unleashed unanticipated fears that more governments in some advanced economies may default on their sovereign debt and trigger a global financial tsunami. This article provides a primer on sovereign debt sustainability and interprets the recent experience of advanced economies in the light of a uniform approach that allows an answer to this question: What are the main factors that contribute to making a country’s debt sustainable or unsustainable?

NOTE: A previous version of this article contained an error on page 212, which has been corrected in this version.

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