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Non‐residents’ Holdings, Market Volatility and Public Debt Sustainability. An Analysis with Data for Italy
Author(s) -
Cafiso Gianluca
Publication year - 2016
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12219
Subject(s) - debt , volatility (finance) , sustainability , economics , debt levels and flows , issuer , internal debt , monetary economics , debt to gdp ratio , business , financial economics , macroeconomics , finance , ecology , biology
Non‐residents’ holdings (NRH) of debt securities have been large in euro area countries, but during the euro area debt crisis some of those countries experienced a steep contraction of such holdings. The analysis aims to provide a data‐founded explanation of what is behind the decrease observed in 2011 by testing two alternative hypotheses. At the same time, we discuss how that decrease might have endangered the sustainability of public debt and study the empirical relevance of the most important of those processes. The topics presented refer to any advanced economy, but we check the hypotheses discussed by taking Italy as a case study because of data constraints. Italy is an interesting country to consider since it is a very large debt issuer. Our results point towards the importance of market volatility to explain variations of NRH, but those holdings do not seem to influence debt sustainability.