Quantitative approaches to fiscal sustainability analysis: a new World Bank tool applied to Turkey

Nina Budina and Sweder van Wijnbergen

No 4169, Policy Research Working Paper Series from The World Bank

Abstract: Fiscal sustainability analysis (FSA) is an important component of macroeconomic analysis. The authors review various quantitative approaches to FSA with a major objective to bring these approaches together and to present a user-friendly tool for FSA that reflects modern developments. They combine a dynamic simulations approach with a simplified version of the steady-state consistency approach. They also incorporate two different methods to deal with uncertainty: user-defined stress tests and stochastic simulations. The tool goes further by evaluating the required fiscal adjustment as a consequence of the stochastic realizations of the exogenous variables. Furthermore, the fiscal sustainability tool incorporates an endogenous debt feedback rule for the primary surplus, a fiscal policy reaction function. Besides outlining the theoretical framework, the authors also present a case study for Turkey.

Keywords: Economic Theory&Research; External Debt; Economic Stabilization; Banks&Banking Reform; Public Sector Economics&Finance (search for similar items in EconPapers)
Date: 2007-03-01
New Economics Papers: this item is included in nep-ban, nep-cwa and nep-mac
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:4169

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