On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-Normality
AbstractThis paper modifies several assumptions in the probabilistic approach to fiscal sustainability proposed by Celasun, Debrun, and Ostry (2007). First, we allow for structural breaks in the vector autoregression model for the macroeconomic variables. Second, in the Monte-Carlo simulations, we draw directly from the empirical distribution of the shocks instead of drawing from a normal distribution, thus allowing for asymmetries and thick tails. Third, we circumvent the use of a fiscal reaction function by focusing attention instead on debt-stabilizing balances, to produce more “agnostic” debt projections. The paper illustrates how these methodological modifications have significant impacts on the results for specific country cases.
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal IMF Staff Papers.
Volume (Year): 56 (2009)
Issue (Month): 4 (November)
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- Hevia, Constantino, 2012. "Using pooled information and bootstrap methods to assess debt sustainability in low income countries," Policy Research Working Paper Series, The World Bank 5978, The World Bank.
- Cruz-Rodríguez, Alexis, 2014.
"Assessing fiscal sustainability in some selected countries,"
54975, University Library of Munich, Germany.
- Alexis CRUZ-RODRÍGUEZ, 2014. "Assessing fiscal sustainability in some selected countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(6(595)), pages 7-22, June.
- Evan Tanner, 2013. "Fiscal Sustainability," IMF Working Papers, International Monetary Fund 13/89, International Monetary Fund.
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