Refinements to the probabilistic approach to fiscal sustainability analysis
AbstractThis paper relaxes some key assumptions in the probabilistic approach to fiscal sustainability. First, the authors identify structural breaks over the sample period used to estimate the covariance matrix of the shocks to the debt ratios. Second, the assumption of normality of the shocks is dropped by modeling their respective empirical distribution directly, which makes it possible to quantify asymetries and thick tails. Third, the use of fiscal reaction functions is avoided by focusing attention on debt-stabilizing balances.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4709.
Date of creation: 01 Sep 2008
Date of revision:
Debt Markets; Economic Theory&Research; Emerging Markets; External Debt;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-13 (All new papers)
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.:
- Gilbert,Christopher L. & Vines,David (ed.), 2006. "The World Bank," Cambridge Books, Cambridge University Press, number 9780521029018, December.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
- Bandiera, Luca & Budina, Nina & Klijn, Michel & van Wijnbergen, Sweder, 2007. "The"how to"of fiscal sustainability : a technical manual for using the fiscal sustainability tool," Policy Research Working Paper Series 4170, The World Bank.
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