IDEAS home Printed from https://ideas.repec.org/a/bla/pbudge/v46y2026i2p47-67.html

Stochastic Simulation Model for Forecasting Index‐Linked Public Expenditure

Author

Listed:
  • Miia Rissanen
  • Jyrki Savolainen
  • Mikael Collan

Abstract

This paper introduces a system dynamics (SD) model for analyzing public sector cost growth, where costs are tied to indices. The SD model isolates the effects of automatic indexation, providing probabilistic projections of expenditure growth. It enables testing of alternative indexation strategies and cost‐reduction measures. Findings show how automatic indexation can accelerate spending during inflation spikes, emphasizing the need for risk‐ and uncertainty‐aware fiscal analysis. Using the Finnish welfare system as an illustrative case, the model output is examined in terms of its value for economic policy planning, providing insights for academics and policymakers.

Suggested Citation

  • Miia Rissanen & Jyrki Savolainen & Mikael Collan, 2026. "Stochastic Simulation Model for Forecasting Index‐Linked Public Expenditure," Public Budgeting & Finance, Wiley Blackwell, vol. 46(2), pages 47-67, June.
    • Handle: RePEc:bla:pbudge:v:46:y:2026:i:2:p:47-67
    DOI: 10.1111/pbaf.70007
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/pbaf.70007
    Download Restriction: no
    File URL: https://libkey.io/10.1111/pbaf.70007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:pbudge:v:46:y:2026:i:2:p:47-67. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0275-1100 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.