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A balance-sheet approach to fiscal sustainability

Author

Listed:
  • Eduardo Levi Yeyati

    (Universidad Torcuato Di Tella/The Brookings Institution)

  • Federico Sturzenegger

    (Universidad de San Andrés/Harvard Kennedy School)

Abstract

This paper proposes a new methodology to assess fiscal sustainability. Our approach relies on computing both government ´s assets and liabilities as opposed to focuting only on explicity liabilities. Assets are primarily the present discounted value of taxes, while liablities are primarily the present discounted value of expenditures in addition to explicit liabilities. By looking at the government ´s balance sheet we can compute the net worth of government, as well as evaluate it’s response to growth, commodity prices or real exchange rate shocks. We show that the implications for fiscal sustainability may be different from those obtained by focusing only on explicit liabilities as in the traditional approaches.

Suggested Citation

  • Eduardo Levi Yeyati & Federico Sturzenegger, 2021. "A balance-sheet approach to fiscal sustainability," Working Papers 55, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:55
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    Citations

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    Cited by:

    1. Eduardo Levy Yeyati & Andrew Powell, 2023. "Sovereign Debt Management," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 6, pages 123-160, Inter-American Development Bank.
    2. Krishanu Pradhan, 2018. "Assessment of India’s Fiscal and External Sector Vulnerability: A Balance Sheet Approach," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(3), pages 308-332, August.
    3. Carlos Vidal Meliá & Juan Manuel Pérez-Salamero González & Anne M. Garvey & Anna Castañer Garriga, 2024. "The supplementary table on pensions (Table 29): Actuarial Balance Sheet Update for the Spanish Pension System to 2021, Wave Three," Studies on the Spanish Economy eee2024-18, FEDEA.
    4. Federico Sturzenegger, 2019. "Macri´s Macro: The meandering road to stability and growth," Working Papers 135, Universidad de San Andres, Departamento de Economia, revised Oct 2019.
    5. Pradhan, Krishanu, 2014. "Assessment of India's fiscal and external sector vulnerability: A balance sheet approach," Working Papers 327, Institute for Social and Economic Change, Bangalore.
    6. Anna Castañer & Anne Marie Garvey & Juan Manuel Pérez-Salamero González & Carlos Vidal-Meliá, 2025. "Transforming Eurostat’s Table 29 into an Actuarial Balance Sheet: A Net Worth Approach to Assessing Public Pension Solvency," JRFM, MDPI, vol. 18(9), pages 1-34, September.
    7. Guoqiang Ma & Yiniu Cui, 2025. "An Analysis of the Sustainability Issues of U.S. Treasury Bonds—A Study Based on the Vector Error Correction Model and Trend Forecasting," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 713-738, March.
    8. Haryo Kuncoro, 2011. "The Sustainability Of State Budget In Debt Repayment," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 13(4), pages 415-434, April.

    More about this item

    JEL classification:

    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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