Professor Giancarlo Corsetti (University of Cambridge) speaks at the ESM

Seminar, "Debt Sustainability Assessments: The state of the art"

The approach to Debt Sustainability Assessments (DSAs) has substantially evolved after the global crisis, with the goal of improving detection of risks. DSAs cover an increasing number of indicators, systematically look into implicit and contingent liabilities, and use statistical methods to quantify highly risky “tail events”. They also operationalise debt limits, by adopting thresholds for debt and payment flows, to single out enhanced vulnerability. While these developments mark true progress, this paper focuses on liquidity risks, contagion risks and the identification of debt limits as critical areas limiting DSA effectiveness. It explains why DSA should embed potentially available official support, and how an incomplete lending architecture is a hurdle for DSA. The paper concludes with a comparative assessment of current standard DSAs, suggests directions for further improvement, and discusses the correct use of DSAs in light of the strengths and weaknesses inherent in the underlying methodologies.
 
Professor Giancarlo Corsetti Ph.D. earned his Ph.D. from Yale, his contributions range from theoretical and empirical work on fiscal and monetary policy, to analyses of currency and financial crises and their international contagion. Professor Corsetti serves as co-editor of the Journal of International Economics, Programme Director at Centre for Economic Policy Research in London, and scientific consultant to the Bank of England and the European Central Bank.

This is an ESM research internal seminar. If you would like to attend, please write an email to ESMresearch@esm.europa.eu