International comovements of public debt

Abstract

This study presents evidence of global and regional comovements in public debt and examines their trends and features. We employ a Bayesian dynamic factor model with time-varying parameters based on the debt-to-GDP ratio of 115 countries. We find the global factor accounts for 38 percent of the total variation in the debt ratio worldwide, but its share decreases over time. Countries with more financial openness and a greater share of external public debt are more exposed to global/regional comovements. The assertion that international financial integration encourages higher government borrowing applies primarily to high-income countries and it does not hold globally.