Concluding discussion

The present dissertation has evaluated the existing methods and studies for the assessment of external sustainability. Sustainability measures can be roughly grouped into two categories: empirical tests and indicators. The first category includes tests on the validity of an economy’s intertemporal budget constraint as well as tests of the “dynamic” sustainability benchmarks implied by the intertemporal and portfolio approaches to the current account. The second category comprises a variety of sustainability indicators, either based on a theoretical model or on some

ad-hoc

rules of thumb. We have focused on the resource gap which is a widely used indicator and on the “unsustainability” indicators constructed by Milesi-Ferretti and Razin (1996a). We have also examined whether indicators of current account reversals can be exploited for the sustainability analysis. Finally, we have analyzed sustainability indicators applied in the International Monetary Fund’s debt sustainability analyses and the Scoreboard of the European Macroeconomic Imbalances Procedure.