Knowing whether public debt is sustainable is as critical for economists analysing fiscal policy as for practitioners tasked with charting desirable policy paths. However, because sustainability is intimately related to the government’s ability to honour all its current and future obligations, it is purely forward-looking and assessing it amounts to making a prediction about an unknowable future.
This column fleshes out three principles guiding the design and implementation of sound debt sustainability frameworks:
- relevance,
- simplicity and
- transparency.
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