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External and Fiscal Sustainability of the Czech Economy: A Quick Look Through the IMF's Night-Vision Goggles

Ales Bulir ()

Research and Policy Notes from Czech National Bank, Research Department

Abstract: The paper presents the rationale for spreadsheet-based debt sustainability assessments. Policymakers can use these exercises in two ways. First, assessments of possible debt developments provide 'reality checks' of macroeconomic projections. Second, the financial stability exercise may indicate vulnerability to crises. Empirically, using the IMF debt sustainability template, the paper finds that the external position of the Czech Republic appears sustainable under most plausible history-based scenarios. However, a deep, two-year recession coupled with fiscal indiscipline might double the 2002 stock of foreign debt by the end of the decade. The fiscal position is significantly more fragile and the fiscal debt-to-GDP ratio quickly approaches 60 percent under some of the more pronounced shocks.

Keywords: Debt sustainability; Macroeconomic projections; Vulnerability. (search for similar items in EconPapers)
JEL-codes: F34 H63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-tra
Date: 2004-12
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Persistent link: https://EconPapers.repec.org/RePEc:cnb:rpnrpn:2004/04

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