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The Fiscal Costs of Contingent Liabilities; A New Dataset

Author

Listed:
  • Elva Bova
  • Marta Ruiz-Arranz
  • Frederik G Toscani
  • H. Elif Ture

Abstract

We construct the first comprehensive dataset of contingent liability realizations in advanced and emerging markets for the period 1990–2014. We find that contingent liability realizations are a major source of fiscal distress. The average fiscal cost of a contingent liability realization is 6 percent of GDP but costs can be as high as 40 percent for major financial sector bailouts. Contingent liability realizations are correlated among each other and tend to occur during periods of growth reversals and crises, accentuating pressure on the budget during already difficult times. Countries with stronger institutions are able to better control and address the underlying risks so that they are less exposed to contingent liability realizations.

Suggested Citation

  • Elva Bova & Marta Ruiz-Arranz & Frederik G Toscani & H. Elif Ture, 2016. "The Fiscal Costs of Contingent Liabilities; A New Dataset," IMF Working Papers 16/14, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:16/14
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    References listed on IDEAS

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    1. Christopher M. Towe, 1991. "The Budgetary Control and Fiscal Impact of Government Contingent Liabilities," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 109-134, March.
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    3. Acemoglu, Daron & Johnson, Simon & Robinson, James & Thaicharoen, Yunyong, 2003. "Institutional causes, macroeconomic symptoms: volatility, crises and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 49-123, January.
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    5. Hana Polackova, 1998. "Contingent Liabilities : A Threat to Fiscal Stability," World Bank Other Operational Studies 11522, The World Bank.
    6. Serkan Arslanalp & Yin Liao, 2013. "Contingent Liabilities and Sovereign Risk: Evidence from Banking Sectors," CAMA Working Papers 2013-43, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    7. Hana Polackova Brixi & Allen Schick, 2002. "Government at Risk : Contingent Liabilities and Fiscal Risk," World Bank Publications, The World Bank, number 15233, June.
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    Cited by:

    1. Claudio Borio & Marco Jacopo Lombardi & Fabrizio Zampolli, 2016. "Fiscal sustainability and the financial cycle," BIS Working Papers 552, Bank for International Settlements.
    2. repec:fru:finjrn:170406:p:71-84 is not listed on IDEAS
    3. repec:wly:ijfiec:v:22:y:2017:i:4:p:421-437 is not listed on IDEAS
    4. repec:eee:jebusi:v:94:y:2017:i:c:p:1-14 is not listed on IDEAS
    5. Julio Escolano & Vitor Gaspar, 2016. "Optimal Debt Policy Under Asymmetric Risk," IMF Working Papers 16/178, International Monetary Fund.
    6. repec:fru:finjrn:180605:p:59-70 is not listed on IDEAS
    7. Nicolas Carnot & Stéphanie Pamies Sumner, 2017. "GDP-linked Bonds: Some Simulations on EU Countries," European Economy - Discussion Papers 2015 - 073, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    8. Kose,Ayhan & Kurlat,Sergio Andres & Ohnsorge,Franziska Lieselotte & Sugawara,Naotaka, 2017. "A cross-country database of fiscal space," Policy Research Working Paper Series 8157, The World Bank.
    9. Fatás, Antonio & Ghosh, Atish & Panizza, Ugo & Presbitero, Andrea, 2019. "The Motives to Borrow," CEPR Discussion Papers 13735, C.E.P.R. Discussion Papers.
    10. António Afonso & João Tovar Jalles, 2019. "Stock flow adjustments in sovereign debt dynamics: the role of fiscal frameworks," EconPol Working Paper 20, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    11. Jordi Baños Rovira & Daniel Montolio & Marco Cangiano & Mark Miller & Ernesto Ganuza & Santiago Lago-Peñas, 2018. "The Challenges of Public Budgeting After the Great Fiscal Crisis: Where Improvements and Reform Can Be Made / Los retos de la presupuestación pública tras la gran crisis fiscal: líneas de mejora y ref," IEB Reports ieb_report_3_2018, Institut d'Economia de Barcelona (IEB).
    12. Manish K. Singh & Marta Gómez-Puig & Simón Sosvilla-Rivero, 2019. "“Increasing contingent guarantees: The asymmetrical effect on sovereign risk of different government interventions"," IREA Working Papers 201914, University of Barcelona, Research Institute of Applied Economics, revised Sep 2019.
    13. José Renato Haas Ornelas, 2017. "Risco, Dívida e Alavancagem Soberana," Working Papers Series 457, Central Bank of Brazil, Research Department.
    14. Narayan, Laxmi, 2017. "Growth of Public Debt in Haryana – Dynamism or Misplaced Priorities," MPRA Paper 79431, University Library of Munich, Germany, revised 05 May 2017.
    15. repec:fru:finjrn:180201:p:9-23 is not listed on IDEAS
    16. Anja Baum & Andrew Hodge & Aiko Mineshima & Marialuz Moreno Badia & Rene Tapsoba, 2017. "Can They Do It All? Fiscal Space in Low-Income Countries," IMF Working Papers 17/110, International Monetary Fund.
    17. António Afonso & João Tovar Jalles, 2019. "Stock Flow Adjustments in Sovereign Debt Dynamics: The Role of Fiscal Frameworks," Working Papers REM 2019/66, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    18. Baum, Anja & Eyraud, Luc & Hodge, Andrew & Jarmuzek, Mariusz & Kim, Young & Mbaye, Samba & Ture, Elif, 2018. "How to calibrate fiscal rules : a primer," MPRA Paper 86423, University Library of Munich, Germany.
    19. Stéphanie Pamies Sumner & Katia Berti, 2017. "A Complementary Tool to Monitor Fiscal Stress in European Economies," European Economy - Discussion Papers 2015 - 049, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    20. Masuch, Klaus & Anderton, Robert & Setzer, Ralph & Benalal, Nicholai, 2018. "Structural policies in the euro area," Occasional Paper Series 210, European Central Bank.
    21. Matteo Ruzzante, 2018. "Financial Crises, Macroeconomic Shocks, and the Government Balance Sheet: A Panel Analysis," IMF Working Papers 18/93, International Monetary Fund.
    22. repec:wsi:jicepx:v:08:y:2017:i:01:n:s179399331750003x is not listed on IDEAS
    23. Franziska Ohnsorge & Shu Yu, 2017. "Recent Credit Surge in Historical Context," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 1-22, February.
    24. Antonio David & Natalija Novta, 2016. "A Balancing Act; Reform Options for Paraguay’s Fiscal Responsibility Law," IMF Working Papers 16/226, International Monetary Fund.

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