Calibrate long term debt to GDP ratio with policy objective

[SeaCelo]

There is a suggestion that long run debt to gdp should be set at 75%. Should this be updated in the baseline calibration?

[Clinton-Joel]

I attach a screenshot from the 2024 Budget Review debt-to-GDP profile as published by the National Treasury, with the debt stabilisation trajectory. A steady state debt-to-GDP ratio exceeding 100 per cent for a small open economy like South Africa could be difficult to defend.

Source: https://www.treasury.gov.za/documents/national%20budget/2024/review/FullBR.pdf

[SeaCelo]

@Clinton-Joel the steady state value is set in ogzaf_default_parameters.json (line 141 of this file). What would be a good alternative?

[Clinton-Joel]

@SeaCelo I assume that by the fiscal year 2031/32 the debt-to-GDP ratio would be 70 per cent for simplicity (a mid-range estimate between the two projection endpoints published by the National Treasury). I suggest the steady state value be adjusted from 1.648802692844462 to 0.9618015708259361. I arrive at this number: 70/72.78008491906319