Framework for Sustainability of the Current Account

• We solve the difference equation determining the time path of debt-to-GDP ratio forward for say 10 years, over the period 2007-2016.

• The resulting equation shows that current debt to GDP ratio at time period 2007 equals the expected discounted present value of foreign debt-to-GDP ratio outstanding in period 2016 relative to GDP, plus the sum of all discounted A’ s between period 2007 and period 2016, where