Exploring Risk-Adjusted Fiscal Sustainability Analysis for Asian Economies

George Kopits (), Benno Ferrarini () and Arief Ramayandi
Additional contact information
George Kopits: Woodrow Wilson International
Benno Ferrarini: Asian Development Bank

No 483, ADB Economics Working Paper Series from Asian Development Bank

Abstract: The paper explores risk-based fiscal analytical approaches to complement a standard debt sustainability analysis when applied under conditions of risk and uncertainty. To outline a possible road map for risk-adjusted fiscal sustainability analysis, the paper first examines the types of vulnerability faced by different emerging economies in Asia and reviews a range of stochastic methods that attempt to explicitly incorporate risk in their analysis. Drawing on international experience, we note that the usefulness of applying a stochastic approach hinges on policy makers’ capacity to identify the sources and extent of risks in assessing fiscal sustainability, which should then allow them to simulate the impact of a hypothetical corrective action on the baseline trajectory of debt or net worth and on its stochastic distribution, including fat-tail risks of default.

Keywords: fiscal sustainability; risk-based fiscal analysis; sovereign debt; stochastic approach (search for similar items in EconPapers)
JEL-codes: D81 E62 G13 H63 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2016-05-13
New Economics Papers: this item is included in nep-mac and nep-sea
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0483

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