Empirical Research On External Debt Sustainability And Its Influence Factors

Foreign debt is one of the important ways of capital formation and financing.Proper financing through net borrowing contributes to economic development,while excessive debt will do harm to the economy.One of the causes of the European sovereign debt crisis was the"excessive1" external indebtedness of several countries.Study to determine a countrys foreign debt sustainability will enhance the ability of borrowers refinancing and debt management,and provide guidelines for loan risk for creditors,and also will enhance the World Bank and IMF's ability to evaluate the debts and the effectiveness of the policy advice,helping the debtor against the possibility of a potential crisis and take preventive measures as soon as possible.On the basis of the previous model,this paper further expands the concept of interest rate in discount factor,and includes current account and Different rates of return on assets and liabilities into the model,so as to meet the constraint condition of sustainable external debt.Both the deterministic hypothesis and the uncertain hypothesis of each variable value were considered.Then,the influences of different influencing factors on the external debt sustainability were analyzed under the two hypotheses.Under certainty,it can be found that for developing countries,there is a significant negative correlation between economic openness and foreign exchange reserve index and external debt sustainability.The term structure,type structure and inflation rate of external debt are positively correlated with the sustainability of external debt of developing countries.For developed countries,the external debt structure,economic growth rate,trade openness and foreign exchange reserves are negatively correlated with external debt sustainability.The term structure of foreign debt is positively correlated with the sustainability of foreign debt.Under uncertainty,external debt sustainability can be converted into the concept of probability.In 2017,the probability of sustainable foreign debt of the United States was 1.2%.When including difference of the rates of return,the probability of sustainable foreign debt increased to 7.3%.When capital gains were added to the calculation,the probability of a sustainable external debt rose to 32 per cent.From the perspective of Brazil's economy at the end of 2017,the probability of sustainable external debt at the current exchange rate is 68.3%,and the probability of sustainable external debt of Brazil is reduced to 52.7%when the difference of the rates of return is included.When the yield includes capital gains,the probability of foreign debt sustainability falls further to 48.1%.Data from both countries show that both the capital account and the current account have an impact on external debt service.