An Analysis of Puerto Rico's Debt Relief Needs to Restore Debt Sustainability

46 Pages Posted: 19 Nov 2018

See all articles by Pablo Alfredo Gluzmann

Pablo Alfredo Gluzmann

Centro de Estudios Economicos Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata; Republic of Argentina - Consejo Nacional de Investigaciones Científicas y Técnicas (CONICET)

Martin Guzman

Columbia University

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: November 2018

Abstract

This paper makes two contributions. First, we examine the macroeconomic implications of Puerto Rico’s Fiscal Plan that was certified in March 2017 for fiscal years 2017-18 to 2026-27. Second, we perform a Debt Sustainability Analysis (DSA) that incorporates the expected macroeconomic dynamics implied by the Fiscal Plan in order to compute Puerto Rico’s debt restructuring needs. We detect a number of flawed assumptions in the Fiscal Plan that lead to an underestimation of its contractionary effects on the island’s economic activity. We conduct a sensitivity analysis of the expected macroeconomic dynamics implied by the plan that allows us to construct more realistic scenarios of Puerto Rico’s debt restructuring needs. We show that the island’s current debt position is unsustainable, and compute the necessary debt relief to restore sustainability under different sets of assumptions. The paper offers general insights for performing a macro-consistent DSA.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Gluzmann, Pablo Alfredo and Guzman, Martin and Stiglitz, Joseph E., An Analysis of Puerto Rico's Debt Relief Needs to Restore Debt Sustainability (November 2018). NBER Working Paper No. w25256. Available at SSRN: https://ssrn.com/abstract=3286875

Pablo Alfredo Gluzmann (Contact Author)

Centro de Estudios Economicos Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata ( email )

Calle 6 e/47 y 48
La Plata, Provincia de Buenos Aires 1900
Argentina

Republic of Argentina - Consejo Nacional de Investigaciones Científicas y Técnicas (CONICET) ( email )

Avda. Rivadavia 1917
Buenos Aires, Federal Capital C1033AAJ
Argentina

Martin Guzman

Columbia University ( email )

2852 Broadway Street
New York, NY 10027
United States

Joseph E. Stiglitz

Columbia Business School - Finance and Economics ( email )

3022 Broadway
814 Uris Hall
New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
9
Abstract Views
71
PlumX Metrics