Assessing Fiscal Sustainability Under Uncertainty
Assessing Fiscal Sustainability Under Uncertainty

Author: Theodore Barnhill

Publisher:

Published: 2014

Total Pages: 34

ISBN-13:

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Unlike conventional fiscal sustainability assessments, the Value-at-Risk approach developed in this paper explicitly captures the contribution of key risk variables to public sector vulnerability. In an illustrative application to Ecuador, the VaR approach confirms a significant risk of government financial failure stemming from the volatility and comovements of the exchange rate, interest rates, oil prices, and output. Although dollarization has helped attenuate fiscal vulnerability, the volatility of sovereign spreads and of oil prices remain major sources of risk for Ecuador's public sector. The paper concludes with a discussion of policy implications, an evaluation of the methodology, and suggestions for future research.

Assessing Fiscal Sustainability Under Uncertainity
Assessing Fiscal Sustainability Under Uncertainity

Author: Mr.George Kopits

Publisher: International Monetary Fund

Published: 2003-04-01

Total Pages: 35

ISBN-13: 1451850220

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Unlike conventional fiscal sustainability assessments, the Value-at-Risk approach developed in this paper explicitly captures the contribution of key risk variables to public sector vulnerability. In an illustrative application to Ecuador, the VaR approach confirms a significant risk of government financial failure stemming from the volatility and comovements of the exchange rate, interest rates, oil prices, and output. Although dollarization has helped attenuate fiscal vulnerability, the volatility of sovereign spreads and of oil prices remain major sources of risk for Ecuador's public sector. The paper concludes with a discussion of policy implications, an evaluation of the methodology, and suggestions for future research.

Assessing Fiscal Sustainability in Theory and Practice
Assessing Fiscal Sustainability in Theory and Practice

Author: Nigel Chalk

Publisher:

Published: 2006

Total Pages: 27

ISBN-13:

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The main purpose of this paper is to provide an overview of approaches to assessing fiscal sustainability. It summarizes the general analytical background, focusing on the present value budget constraint, which is the benchmark against which solvency is determined, tests of sustainability (including sustainability indicators), and sustainability and uncertainty. The paper then looks at the way in which fiscal sustainability has been assessed in different types of IMF work. Finally the link between fiscal and external sustainability is discussed.

Assessing Fiscal Sustainability
Assessing Fiscal Sustainability

Author: Mr.Enzo Croce

Publisher: International Monetary Fund

Published: 2003-07-01

Total Pages: 35

ISBN-13: 1451856563

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To monitor fiscal sustainability, this paper proposes a recursive algorithm derived from the law of motion of the debt-to-GDP ratio, subject to a government reaction function that links convergence to the targeted debt ratio with primary fiscal surpluses. Based on quarterly estimates of this algorithm in the 1990s, 12 developed and developing countries are ranked according to their degree of sustainability. For a number of countries, the paper finds evidence of causality between the fiscal policy stance and growth-adjusted real interest rates.

Assessing Fiscal Sustainability in Theory and Practice
Assessing Fiscal Sustainability in Theory and Practice

Author: Nigel Andrew Chalk

Publisher: International Monetary Fund

Published: 2000-04

Total Pages: 34

ISBN-13:

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The main purpose of this paper is to provide an overview of approaches to assessing fiscal sustainability. It summarizes the general analytical background, focusing on the present value budget constraint, which is the benchmark against which solvency is determined, tests of sustainability (including sustainability indicators), and sustainability and uncertainty. The paper then looks at the way in which fiscal sustainability has been assessed in different types of IMF work. Finally the link between fiscal and external sustainability is discussed.

Public Debt Sustainability Under Uncertainty
Public Debt Sustainability Under Uncertainty

Author: Rossen Rozenov

Publisher: International Monetary Fund

Published: 2017-03-13

Total Pages: 28

ISBN-13: 1475587023

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The paper offers an approach to assessing the sustainability of public debt taking into account the effect of fiscal policy on output, as well as uncertainty in the model parameters and system dynamics. Uncertainty is specified in general terms, and the analysis is based on the notion of invariant sets. Examples are provided to illustrate how the method can be applied in practice.

Assessing Fiscal Stress
Assessing Fiscal Stress

Author: Iva Petrova

Publisher: International Monetary Fund

Published: 2011-05-01

Total Pages: 43

ISBN-13: 1455254312

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This paper develops a new index which provides early warning signals of fiscal sustainability problems for advanced and emerging economies. Unlike previous studies, the index assesses the determinants of fiscal stress periods, covering public debt default as well as near-default events. The fiscal stress index depends on a parsimonious set of fiscal indicators, aggregated using the approach proposed by Kaminsky, Lizondo and Reinhart (1998). The index is used to assess the build up of fiscal stress over time since the mid-1990s in advanced and emering economies. Fiscal stress has increased recently to record-high levels in advanced countries, reflecting raising solvency risks and financing needs. In emerging economies, risks are lower than in mature economies owing to sounder fiscal fundamentals, but fiscal stress remains higher than before the crisis.

A Framework for Assessing Fiscal Sustainability and External Viability, with An Application to India
A Framework for Assessing Fiscal Sustainability and External Viability, with An Application to India

Author: Ms.Karen Elizabeth Parker

Publisher: International Monetary Fund

Published: 1993-10-01

Total Pages: 41

ISBN-13: 1451850050

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This paper presents a simple macroeconomic simulation model which can be used to evaluate alternative fiscal strategies and their implications for external viability. It attempts to bridge the gap between the literature on fiscal sustainability and the demands of operational work. The framework, developed in a spreadsheet format, generates estimates of public spending compatible with identified targets for growth, inflation and domestic and foreign borrowing. The difference between the spending path consistent with these targets and that based on current policies is the fiscal adjustment required to meet the authorities’ macroeconomic objectives. Alternatively, the framework can be used to assess the implications for inflation, interest rates and public indebtendess of a given spending path. Finally, one can analyze the impact of financial reform on fiscal and external performance. The model is applied to India to illustrate the types of simulations that may be conducted.

Fiscal Sustainability
Fiscal Sustainability

Author: Mr.Evan Tanner

Publisher: International Monetary Fund

Published: 2013-04-22

Total Pages: 49

ISBN-13: 1484351495

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This paper critically reviews recent work regarding the sustainability of public debt. It argues that Debt Sustainability Analyses (DSAs) should be more than mere mechanical simulation exercises. Instead, a DSA should be linked to some objective regarding the distribution of fiscal burdens and distortions over time (in the tradition of Barro’s 1979 tax smoothing objective). The paper discusses objective functions that yield simple and transparent fiscal policy rules.