HOW TO MEASURE DEBT SUSTAINABILITY IN DEVELOPED COUNTRIES? - A COMPARISON OF DIFFERENT APPROACHES

Considering there is no single methodology for measuring debt sustainability in developed countries the paper compares two approaches most commonly used in the analysis: (1) influence of public debt to GDP growth rate which indicates different findings - positive influence if the debt is low and negative impact above some particular level of public debt; and (2) the impact of public debt to interest rates (spreads) that indicates if the country is able to get money in the international financial markets at low interest rates, the level of debt is sustainable. The results of many different empirical analyses have been extracted and the conclusion points the diversity of results, methodologies, sample countries, but also the lack of systematic methodology to measure the debt sustainability. There is also area to additional research which should involve debt inter-causality with the current account as well as the connection between the debt with the amounts received from the European structural and investment funds.