Primary Balance: Sustainability Analysis under Uncertainty

Valerie Lankester Campos, Kerry Loaiza Marín and Carlos Monge Badilla
Authors registered in the RePEc Author Service: Kerry Loaiza-Marín ()

No 10780, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper analyzes the sustainability of Costa Rican sovereign debt within the intertemporal budget constraint framework, which is complemented with the estimation of the fiscal reaction function and a risk assessment under the fan chart methodology using annual data from 1974 until 2018. Results show that fiscal behavior has been unsustainable for specific episodes in the long run, and in the short run there have been few instances of debt sustainability since the economic crisis of the early 1980s. Given that a major fiscal reform was approved at the end of 2018, an evaluation of its impact on the path of adjustment of primary balance, considering uncertainty, is included.

Keywords: debt sustainability; Primary balance; Fiscal reaction function; Riskassessment; Fan chart (search for similar items in EconPapers)
JEL-codes: C15 C22 E62 H63 (search for similar items in EconPapers)
Date: 2020-10
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:10780

DOI: 10.18235/0002800

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