Document Type

Post-Print

Publication Date

6-28-2025

Subjects

Public debt, Stock-flow analysis

Abstract

This paper investigates the drivers of public debt surges in 172 countries from 1980 to 2021, focusing on stock-flow adjustments (SFA)—discrepancies between annual debt changes and budget deficits. Using survival analysis methods, we find that a one percentage point increase in the SFA to GDP ratio raises the hazard rate of a debt surge by 16%, with stronger effects in advanced economies (28%) compared to emerging markets (15%). Conditional on an increasing debt trend, higher SFA significantly increase the probability of a debt spike materializing. We address potential self-selection with an IV approach based on fiscal transparency, emphasizing that accurate SFA estimates are critical for debt sustainability analysis and policy risk assessment. Our findings suggest policy measures to mitigate risks from hidden debt trajectories, including enhanced budgetary transparency, strengthened debt management, more effective fiscal rules, and comprehensive risk assessment frameworks.

Rights

This is the author's manuscript, also known as the post-print version. The final version © Elsevier is available from the publisher: https://doi.org/10.1016/j.ememar.2025.101306

DOI

10.1016/j.ememar.2025.101306

Persistent Identifier

https://archives.pdx.edu/ds/psu/43900

Included in

Economics Commons

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