The International Monetary Fund published a working paper estimating public debt overhang thresholds for 105 countries and assessing why these thresholds differ across economies. Using a Kalman Filter approach applied to a standard growth model, the paper finds pronounced heterogeneity in estimated thresholds within and across country groups, with limited time variation. In a second step, the analysis links higher public debt overhang thresholds to stronger payment track records, higher quality institutions and governance, more favourable public debt composition in terms of currency, maturity and creditor base, and larger and more developed financial markets. The IMF notes the paper is research in progress intended to elicit comments and encourage debate, and that the views are those of the authors.
International Monetary Fund 2026-03-20
International Monetary Fund working paper estimates debt overhang thresholds for 105 countries and finds large cross country differences
The International Monetary Fund released a working paper estimating public debt overhang thresholds for 105 countries, highlighting significant heterogeneity across economies. The study associates higher thresholds with stronger payment records, better institutional quality, favorable debt composition, and more developed financial markets. The paper is intended to provoke discussion and reflects the authors' views.