The sustainability of subnational public debt: Evidence from Mexican states

This paper evaluates public debt sustainability in all 32 subnational Mexican states from 1993 to 2016. Using dynamic panel data methods, we find several interesting results. First, although subnational public debt in Mexican states, in general, is still sustainable, in some states, fiscal stances have been compromised in recent years. Second, using different political indicators, we notice that these factors do not affect public debt accumulation. Third, when taking subsample characteristics into account, we observe that smaller, more open, and less dynamic states have more compromised fiscal stances, particularly following the recent global financial crisis.