Sovereign Debt Dashboard

What this page shows

This page presents the results of the paper Fiscal Capacity and Sovereign Debt Crises in the G7 (Frank Schmid, 13 October 2026). Every value on it is a value the paper reports; the page adds no result of its own.

The model: The paper models the public debt of the seven G7 economies, with China carried beside them, from 2026 through 2036. A government's borrowing cost includes a credit spread; the spread depends on how far the debt stands from a fiscal limit, the present value of the largest primary surplus the government can sustain; and the debt depends in turn on the borrowing cost. The price of the debt in a year is a solution of that loop.
The crisis equilibrium: Over a range of debt, the crisis zone, the loop has three solutions, two of them stable: a benign one and a crisis one at a higher yield, with an unstable one between them that the model never selects. Which of the two the market prices is a matter of coordination among investors, drawn in the model as a random event. Beyond the zone only the crisis solution exists. An economy is on the crisis equilibrium in a year in which its debt is priced at the crisis solution.
The baseline and the two regimes: The baseline is the path on which investors never coordinate on the crisis solution. In a crisis the paper follows two policy regimes. Under regime M the fiscal authority raises its primary balance as the spread rises, and the policy rate responds more than one for one to inflation. Under regime F the fiscal authority does not adjust, the policy rate responds less than one for one, and the price level carries the adjustment.
Fiscal capacity: The fiscal capacity is the largest primary surplus (the budget balance before interest) a government can sustain in the model. The paper does not assume it. It reads it from each economy's own record, as the largest average over ten consecutive years, from 1950 or the record's first year, with receipts from abroad excluded. China has no long record, and its capacity is scaled from its revenue.
A share of paths: The model is run 10,000 times, each run with its parameters and its annual shocks drawn at random within stated ranges. A share of paths is the percentage of those runs in which an event occurs in at least one year of 2027 through 2036. It is a count over the model's simulated paths under the stated assumptions. It is not an annual rate, and it is not a forecast or a probability that the event occurs.

The central scenarios and the simulated paths, by economy

Each row of the strip is one run of the model for one economy: the baseline, regime M, and regime F. A dark cell is a year on the crisis equilibrium; a light cell is a year in which a crisis solution exists and the economy is not on it.

Years on the crisis equilibrium

on the crisis equilibriuma crisis solution exists; the economy is not on itno crisis solution

First year on the crisis equilibrium (years on it), and the share of simulated paths with at least one such year

Debt is net debt: debt held by the public for the United States.

The central scenarios, by economy

Each chart follows one quantity for the economy selected, under the baseline and the two regimes. Where the three lines coincide, the regimes do not differ for that economy in that year.

Economy baselineregime Mregime Fyears on the crisis equilibrium, regime M

Regime M: the fiscal authority raises its primary balance as the spread rises, and the policy rate responds more than one for one to inflation. Regime F: the fiscal authority does not adjust, the policy rate responds less than one for one, and the price level carries the adjustment. The baseline is the path on which investors never coordinate on the crisis solution; an economy whose pricing carries the crisis solution alone is on the crisis equilibrium in the baseline as well.

Across the simulated paths

A bar is a share of the simulated paths of the panel selected, not a probability and not an annual rate: the percentage of paths on which the economy spends at least one year on the crisis equilibrium, and the percentage on which it arrives there by coordination while a benign solution exists.

Panel

Share of paths, 2027 through 2036, percent

at least one year on the crisis equilibriumwith coordination on it

Every panel other than the central one changes one feature of the central panel and replays the same draws, so two panels differ by that feature alone.

How much of a share of paths the parameter draw carries

The line is the median path; the bands hold the middle half and the middle nine tenths of the paths in each year. They describe the spread of the model's paths under its draws.

Economy median25th through 75th percentile5th through 95th percentile

Fiscal capacity: where it is read, and where a result turns on it

The capacity is read from each economy's long record of its primary balance, as the largest average over ten consecutive years, receipts from abroad excluded. The chart shows the record for the economy selected, with the ten years shaded.

The fiscal capacities of record

Economy balance before net interest, percent of GDPthe ten-year windowthe fiscal capacity

The capacity at which each economy first carries a year on the crisis equilibrium, percent of GDP

One economy's capacity is set to each value of a grid, every other economy's as of record, and the model is run whole. A point is the largest capacity tried at which the economy carries at least one year on the crisis equilibrium in that run; above it, it carries none. Where the tick, the capacity of record, lies to the left of a point, the economy carries a crisis year in that run.

capacity of recordbaselineregime Mregime F

The capacity is set from the first year of the horizon and is not an announced one, so an entry is not the requirement of the panel “The path to resolution”.

The path to resolution: the resolution map

For each economy the map covers, the table gives the setting of one instrument, announced in the year shown and held, at which the crisis equilibrium no longer exists for that economy. Three instruments are solved one at a time: a fiscal capacity, a ceiling on the sovereign spread, and an increment to trend growth.

Instrument

The same, as bars, by the year of the announcement

2027202920312033

The combination: the smallest capacity that clears at each spread ceiling announced in 2027 (ceiling in percentage points across; capacity in percent of GDP up)

regime Mregime Fthe capacity of record

The swing against the revenue and expenditure base: percent of GDP, percentage points of GDP, and percent of the WEO April 2026 general government revenue and outlays of 2027

The swing is the distance from the primary balance of 2027 to the capacity of record, and to the capacity required under regime M. Announced and priced, not delivered: the table states what a swing of the size would be against the base, not that it is delivered or how it would be split. The shares are on the general government basis of the WEO, while the model's U.S. balance is the federal one of the CBO.

The limit and the baseline

The crisis solution exists because the fiscal limit is discounted at a rate that carries the candidate spread. The table reads the pricing equation of one economy and year four ways. With the limit held at its crisis value, the crisis solution is the only one; with the limit held at its benign value, or discounted without the spread, the only solution is at zero spread.

First year on the crisis equilibrium (years on it): the limit as the model carries it, and discounted without the candidate spread in every economy and year

The baseline of the United States beside the Congressional Budget Office's projection, percent of GDP

The model's baseline is not fitted to the published projections; the distance is reported. The model's ratios are over calendar-year GDP and the CBO's over fiscal-year GDP.

the model's baselinethe CBO's projection

Debt held by the public

Net interest

The baselines of the six beside the IMF's projected net debt

The model holds each of the six economies' primary balance at its 2026 value, where the published projection carries a path of its own; the primary-balance column is what that difference contributes to the gap.

The assumptions of the model

Each parameter with its value, its basis, and its treatment in the simulated paths: fixed, or drawn on the range shown.

The parameters as the paper’s appendix lists them.

Sources and limits

The paper

Fiscal Capacity and Sovereign Debt Crises in the G7, Frank Schmid, 13 October 2026. The paper states the model, its equations, its data, and each result shown here.

Public data sources

The Assumptions panel gives the source of each parameter in its basis column.

Limits

Every value on this page is read from the results the paper reports; the page computes nothing and prints nothing the paper does not.
A share is a share of the simulated paths on which the event occurs in at least one year of 2027 through 2036. It is not an annual rate, and it is not a forecast.
The results hold under the assumptions the Assumptions panel lists. Several of them rest on no record and are drawn on ranges of convenience; each is marked as such there.
The settings in the panel “The path to resolution” are announced and priced by the market, held through the horizon, and not delivered on the path they clear; they state what each instrument would have to be, not whether it is attainable. Each is reported at two decimals on the side that clears.
The capacity at which an economy first carries a crisis year is found for one economy at a time, the others as of record, with the capacity set from the first year and not announced.
The reading of the fiscal limit without the candidate spread is a device for showing what the crisis solution rests on; it is not a scenario of the paper.