Interest rate growth differentials matter for debt sustainability: IMF paper
An International Monetary Fund paper published on Friday shows differences in the rate paid on government debt and the growth of an economy play a significant role in underpinning market expectations of debt defaults.
Julio Escolano, Anna Shabunina and Jaejoon Woo, the paper's authors, examine the differential between the average interest rate paid on government debt and the growth rate of the economy – the interest rate growth differential – and its impact on GDP growth in non-advanced
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