 Stochastic Projections and Debt. Chapter 5 in Tax Policy and Uncertainty, 2020, pp 113-134 from Edward Elgar Publishing Abstract: This chapter introduces uncertainty into the deterministic debt projection model outlined in Chapter 3. Stochastic projections are obtained using a non-parametric approach which involves sampling from past joint distributions of those variables subject to uncertainty. The question considered is: what are the implications for the projected path of the probability distribution of the public debt ratio if the future joint variability of a number of component variables is assumed to be similar to that observed in the past? Uncertainly is limited to two major expenditure components, the world interest rate and the rate of productivity growth. It is possible to form probability statements about ranges of the debt ratio in each year, in particular the probability that any given debt ratio is exceeded. The model is used to examine the implications of adopting several income tax policy changes designed to achieve a specified debt ratio by the end of the projection period. Comparisons are made with results using the deterministic version of the model. Keywords: Economics and Finance; Politics and Public Policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:20207_5 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Chapters from Edward Elgar Publishing |
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