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

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  • Ales Bulir

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.

Suggested Citation

  • Ales Bulir, 2004. "External and Fiscal Sustainability of the Czech Economy: A Quick Look Through the IMF's Night-Vision Goggles," Research and Policy Notes 2004/04, Czech National Bank.
    • Handle: RePEc:cnb:rpnrpn:2004/04
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    File URL: https://www.cnb.cz/export/sites/cnb/en/economic-research/.galleries/research_publications/irpn/download/irpn_4_2004.pdf
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    Citations

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    Cited by:

    1. Melecky, Ales & Melecky, Martin, 2014. "The Checks of Czechs: Optimizing the Debt Portfolio of the Czech Government," MPRA Paper 57604, University Library of Munich, Germany.
    2. Ales Krejdl, 2006. "Fiscal Sustainability - Definition, Indicators and Assessment of Czech Public Finance Sustainability," Working Papers 2006/3, Czech National Bank.

    More about this item

    Keywords

    Debt sustainability; Macroeconomic projections; Vulnerability.;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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