3/2014 Juan Carlos Cuestas, Luis A. Gil-Alana and Paulo José Regis. On the changes in the sustainability of European external debt: What have we learned

Working Papers of Eesti Pank 3/2014

Published in Review of International Economics, 2015

In this paper we aim to analyse the level of sustainability of external debt and, more importantly, how it has changed for a number of European economies. Given the severity of the crisis since 2008, we argue that the path of external debt burdens may have changed since the start of the crisis, given the concerns about debt accumulation in most countries. We follow the advice of Bohn (2007) and analyse the reaction of present debt accumulation to past debt stock, incorporating the possibility of endogenously determined structural breaks in this reaction function. We find that structural breaks happen in most cases after 2008, highlighting the importance of the policy measures taken by most governments.

JEL Codes: E31, E32, C22

Keywords: external debt, sustainability, crisis

Corresponding author's e-mail address: j.cuestas [at] sheffield.ac.uk


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The views expressed are those of the authors and do not necessarily represent the official views of Eesti Pank