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.
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Paper provided by Czech National Bank, Research Department in its series Research and Policy Notes with number
2004/04.
Find related papers by JEL classification: F34 - International Economics - - International Finance - - - International Lending and Debt Problems H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management
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