A toolkit to assess fiscal vulnerabilities and risks in advanced economies

Andrea Schaechter, C. Emre Alper, Elif Arbatli (earbatli@imf.org), Carlos Caceres, Giovanni Callegari, Marc Gerard, Jiri Jonas, Tidiane Kinda, Anna Shabunina and Anke Weber

Applied Economics, 2014, vol. 46, issue 6, 650-660

Abstract: This article presents a range of tools and indicators for analysing fiscal vulnerabilities and risks for advanced economies. The analysis covers key short-, medium- and long-term dimensions. Short-term pressures are captured by assessing (i) gross funding needs, (ii) market perceptions of default risk and (iii) stress dependence among sovereigns. Medium- and long-term pressures are summarized by (iv) medium- and long-term budgetary adjustment needs, (v) susceptibility of debt projections to growth and interest rate shocks and (vi) stochastic risks to medium-term debt dynamics. Aiming to cover a wide range of advanced economies and minimize data lags, has also influenced the selection of empirical methods. Due to these features, they can, for example, help inform the joint IMF--FSB Early Warning Exercise (EWE) on the fiscal dimensions of economic risks.

Date: 2014
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DOI: 10.1080/00036846.2013.861589

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