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Question 1 [CLO-5] Consider the fiscal sustainability indicators of Bangladesh economy over the period of fiscal year 2011 to fiscal year 2020, given the table
Question 1 [CLO-5] Consider the fiscal sustainability indicators of Bangladesh economy over the period of fiscal year 2011 to fiscal year 2020, given the table below: Source: Ministry of rinanice, bangadesn A. Using the debt indicators, derive the public debt dynamics over the decade. Explain the key parameters of the evolution of debt dynamics. B. Determine the decomposition of snowball effects - interest bill and growth contribution from the debt dynamics equation. Do you think that interest effect dominates growth effect? Verify your result from the estimation of debt equation. C. Derive the snowball effects in case of inflation explicit form. Calculate numerically and compare with question-B. Are there any changes? Explain your results. D. Construct the difference equation of public debt dynamics. Solve the public debt equation. E. Estimate the steady state debt, and draw the time path of debt equation. Do you think that debt path follows divergence condition? Explain your answer. F. Suppose the growth rate falls by 50 percent and interest increases by 20 percent. What would happen in the debt path? Explain your answer in mathematically and graphically
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