02190cas a2200277 a 4500 AALejournalIMF020753 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513523767 1018-5941 BD-DhAAL BD-DhAAL Moreno Badia, Marialuz. Debt Is Not Free / Marialuz Moreno Badia, Paulo Medas, Pranav Gupta, Yuan Xiang. Washington, D.C. : International Monetary Fund, 2020. 1 online resource (68 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students With public debt soaring across the world, a growing concern is whether current debt levels are a harbinger of fiscal crises, thereby restricting the policy space in a downturn. The empirical evidence to date is however inconclusive, and the true cost of debt may be overstated if interest rates remain low. To shed light into this debate, this paper re-examines the importance of public debt as a leading indicator of fiscal crises using machine learning techniques to account for complex interactions previously ignored in the literature. We find that public debt is the most important predictor of crises, showing strong non-linearities. Moreover, beyond certain debt levels, the likelihood of crises increases sharply regardless of the interest-growth differential. Our analysis also reveals that the interactions of public debt with inflation and external imbalances can be as important as debt levels. These results, while not necessarily implying causality, show governments should be wary of high public debt even when borrowing costs seem low. Mode of access: Internet Gupta, Pranav. Medas, Paulo. Xiang, Yuan. IMF Working Papers; Working Paper ; No. 2020/001 Full text available on IMF http://elibrary.imf.org/view/journals/001/2020/001/001.2020.issue-001-en.xml IMF e-Library