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Illuminating budgetary risks: The role of stress testing

Author

Listed:
  • Wouter Schilperoort
  • Peter Wierts

Abstract

The increased vulnerability of government finances in many countries underlines the importance of public risk management. We apply a specific risk management tool – stress testing – to public finances. After presenting a general framework for stress testing government finances, we illustrate its application for the case of the Netherlands. Our analysis indicates that high levels of contingent liabilities call for sufficient shock absorption capacity in public finances. JEL classification: E62, H63 Keywords: Fiscal policy, public debt, stress test, risk management, budgetary sensitivity, implicit and explicit guarantees, Netherlands

Suggested Citation

  • Wouter Schilperoort & Peter Wierts, 2013. "Illuminating budgetary risks: The role of stress testing," OECD Journal on Budgeting, OECD Publishing, vol. 12(3), pages 1-18.
    • Handle: RePEc:oec:govkaa:5k46f8g99f7j
    DOI: 10.1787/budget-12-5k46f8g99f7j
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    More about this item

    Keywords

    fiscal policy; public debt; stress test; risk management; budgetary sensitivity; implicit and explicit guarantees; netherlands;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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