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External and Fiscal Sustainability of the Czech Economy: A Quick Look Through the IMF's Night-Vision Goggles


  • Ales Bulir


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.

Suggested Citation

  • Ales Bulir, 2004. "External and Fiscal Sustainability of the Czech Economy: A Quick Look Through the IMF's Night-Vision Goggles," Research and Policy Notes 2004/04, Czech National Bank, Research Department.
  • Handle: RePEc:cnb:rpnrpn:2004/04

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    References listed on IDEAS

    1. Roman Matousek, 2001. "Transparency and Credibility of Monetary Policy in Transition Countries: The Case of the Czech Republic," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 4(2), pages 91-104, November.
    2. Michael Woodford, 2004. "Inflation targeting and optimal monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 15-42.
    3. Kevin Ross, 2002. "Market Predictability of ECB Policy Decisions; A Comparative Examination," IMF Working Papers 02/233, International Monetary Fund.
    4. Gabriel Pérez Quirós & Jorge Sicilia, 2002. "Is the European Central Bank (and the United States Federal Reserve) predictable?," Working Papers 0229, Banco de España;Working Papers Homepage.
    5. Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
    6. Richard Podpiera, 2000. "Czech Financial Market Efficiency in Light of Recent Interest Rate Cuts," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 50(5), pages 270-282, May.
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    Cited by:

    1. Ales Krejdl, 2006. "Fiscal Sustainability - Definition, Indicators and Assessment of Czech Public Finance Sustainability," Working Papers 2006/3, Czech National Bank, Research Department.

    More about this item


    Debt sustainability; Macroeconomic projections; Vulnerability.;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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