Abstract

ZAPATA-QUIMBAYO, Carlos-Andrés  and  CHAMORRO-NARVAEZ, Raúl-Alberto. Public Debt and Fiscal Sustainability in Colombia: Analysis Using Fiscal Reaction Functions. Ens. Econ. [online]. 2022, vol.32, n.61, pp.35-58.  Epub Mar 10, 2023. ISSN 0121-117X.  https://doi.org/10.15446/ede.v32n61.96360.

In this article, we evaluate fiscal sustainability in Colombia by using three different methodologies: stationarity tests; estimation of fiscal reaction functions (linear and non-linear) applying the two-stage least squares and the generalized method of moments; and applying the synthetic indicator of fiscal sustainability proposed by Mackiewicz-tyziak and tyziak, (2019). To estimate this indicator, we incorporate the effect of the interest rate on the debt, which is considered as an endogenous variable, and we evaluate the response of the interest rate to changes on the level of debt. Results, although they show the fulfillment of some of the sustainability conditions for Colombia until 2019, they also highlight the risk represented by the high level of indebtedness that the country reached in 2020, because of the recent crisis of the Covid-19 pandemic.

JEL Codes: C52; E43; E62; H68.

Keywords : fiscal sustainability; fiscal reaction function; endogenous interest rate.

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