Fiscal Sustainability in the Presence of Systemic Banks: the Case of EU countries
We provide a first attempt to include off-balance sheet, implicit insurance to SIFIs into a consistent assessment of fiscal sustainability, for 27 countries of the European Union. We first calculate tax gaps à la Blanchard (1990) and Blanchard et al. (1990). We then introduce two alternative measures of implicit off-balance sheet liabilities related to the risk of a systemic bank crisis. The first one relies on microeconomic data at the bank level. The second one is based on econometric estimations of the probability and the cost of a systemic banking crisis. The former approach provides an upper evaluation of the fiscal cost of systemic banking crises, whereas the latter one provides a lower one. Hence we believe that the combined use of these two methodologies helps to gauge the range of fiscal risk.
|Date of creation:||2014|
|Date of revision:|
|Publication status:||Published, International Tax and Public Finance, 2014, Published online 29 March 2013|
|Note:||View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00825256|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/ |
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