A new look at fiscal sustainability: an attempt to reveal the relationship between the sustainability of external debt and the inequality
Researches on sustainability of public debt have been conducted extensively focusing on various criteria, such as debt/GDP ratio, debt/export ratio, no-bubble condition, banks’ home bias etc. The present paper attempts to look at the problem from a different angle. That is, following the recent literatures that pay attention to the inequality, we examine the relationship between the sustainability of external debt and the inequality. It is revealed that in order for the external debt to be sustainable, country should be more equal, while the initial debt/GDP ratio should be smaller and the interest rate on the external debt should be lower.
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