Fiscal Sustainability: Conceptual, Institutional, and Policy Issues

The chronic nature of sovereign debt crises has resulted in the growing interest of analysts in finding both their real causes and the mechanisms of cross-country transmission - the so-called contagion effect. In this paper, we will try to answer the frequently asked question: what is the “safe” level of public debt (i.e. what level helps to avoid the risk of sovereign default)? Simultaneously, we will address various conceptual, institutional, and statistical dilemmas related to the definition and measurement of public debt.