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The following formulas related to debt dynamics are based on the assumption that changes in liabilities are the result of above-the-line budgetary operations. This means that the debt path is determined by the path of overall fiscal balances (or primary balances and interest bill). In particular, the formulas abstract from the use of privatization proceeds; off-budget operations; gains and losses on (below-the-line) financial operations; or valuation changes due to exchange rate moves. For formulas usage purposes, these operations could be added to the primary balance in the equations below, as they play a similar formal role in the determination of the dynamics of debt. Also, the formulas do not consider central bank deficit financing, such as purchases of government debt (seigniorage).
Julio Escolano (Fri,) studied this question.