Analyzing the Impact of Macroeconomic Shocks on Public Debt Dynamics: An Application to the Czech Republic
AbstractThe global financial crisis and its ramification into the fiscal area have demonstrated the importance of regular assessment and monitoring of fiscal vulnerabilities, including the sustainability of sovereign debt. This paper extends the analytical framework of Favero and Giavazzi (2007) to facilitate the analysis of the effects of macroeconomic shocks on public debt dynamics in an open economy. It then applies this framework using the data for the Czech Republic and derives some policy implications from such an analysis. The modeling framework nests a linear structural vector auto-regression (SVAR) model estimated with short-run identifying restrictions and a non-linear equation describing the public debt dynamics. The main variables of the system include GDP growth, inflation, the effective interest rate on government debt, government expenditures and revenues, the exchange rate and government debt. The utilized estimation method is the Bayesian approach.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 34114.
Date of creation: Oct 2011
Date of revision:
Macroeconomic Shocks; Non-linear Public Debt Dynamics; Open Economy; Czech Republic; Structural Vector Autoregression Model; Bayesian Estimation;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-22 (All new papers)
- NEP-CIS-2011-10-22 (Confederation of Independent States)
- NEP-MAC-2011-10-22 (Macroeconomics)
- NEP-TRA-2011-10-22 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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