Publication: Hidden Debt Revelations
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Date
2024-09-18
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2024-09-18
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How reliable are public debt statistics This paper quantifies the magnitude, characteristics, and timing of hidden debt by tracking ex post data revisions across a comprehensive new database of more than 50 vintages of World Bank debt statistics. In a sample of debt data covering 146 countries and 53 years, the paper establishes three new stylized facts: (i) debt statistics are systematically under-reported; (ii) hidden debt accumulates in boom years and tends to be revealed in bad times, often during IMF programs and sovereign defaults; and (iii) in debt restructurings, higher hidden debt is associated with larger creditor losses. The novel data is used to numerically discipline a quantitative sovereign debt model with hidden debt accumulation and an endogenous monitoring decision that triggers revelations. Model simulations show that hidden debt has adverse effects on default risk, debt-carrying capacity and asset prices and is therefore welfare detrimental.
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“Horn, Sebastian; Mihalyi, David; Nickol, Philipp; Sosa-Padilla, César. 2024. Hidden Debt Revelations. Policy Research Working Paper; 10907. © World Bank. http://hdl.handle.net/10986/42162 License: CC BY 3.0 IGO.”
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