IDEAS home Printed from https://ideas.repec.org/p/euf/dispap/226.html
   My bibliography  Save this paper

The Stochastic Simulations of the Commission’s Debt Sustainability Analysis: A Refined Approach

Author

Listed:
  • Frédérique Bec
  • François Courtoy
  • Philipp Mohl
  • Frederic Opitz

Abstract

Stochastic debt projections are essential for understanding uncertainties in debt dynamics and ensuring robust debt sustainability analyses. The Commission’s stochastic debt sustainability analysis (SDSA) currently features two technical aspects that deserve to be addressed: i) the non-consideration of the persistence of shocks and ii) the assumption of a Gaussian distribution for simulating shock trajectories. This paper presents two technical refinements to improve the Commission’s SDSA by i) allowing for the persistence of shocks by applying a pre-filtering approach with a shock-specific lag structure across all countries and ii) implementing a bootstrapping technique to relax the Gaussian distribution assumption. These new features will be incorporated in the Commission’s DSA, to identify fiscal sustainability risks.

Suggested Citation

  • Frédérique Bec & François Courtoy & Philipp Mohl & Frederic Opitz, 2025. "The Stochastic Simulations of the Commission’s Debt Sustainability Analysis: A Refined Approach," European Economy - Discussion Papers 226, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:dispap:226
    as

    Download full text from publisher

    File URL: https://economy-finance.ec.europa.eu/publications/stochastic-simulations-commissions-debt-sustainability-analysis-refined-approach_en
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

    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:euf:dispap:226. 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: ECFIN INFO (email available below). General contact details of provider: https://edirc.repec.org/data/dg2ecbe.html .

    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.