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Quantitative approaches to fiscal sustainability analysis : a new World Bank tool applied to Turkey

Author

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  • Budina, Nina
  • van Wijnbergen, Sweder

Abstract

Fiscal sustainability analysis (FSA) is an important component of macroeconomic analysis. The authors review various quantitative approaches to FSA with a major objective to bring these approaches together and to present a user-friendly tool for FSA that reflects modern developments. They combine a dynamic simulations approach with a simplified version of the steady-state consistency approach. They also incorporate two different methods to deal with uncertainty: user-defined stress tests and stochastic simulations. The tool goes further by evaluating the required fiscal adjustment as a consequence of the stochastic realizations of the exogenous variables. Furthermore, the fiscal sustainability tool incorporates an endogenous debt feedback rule for the primary surplus, a fiscal policy reaction function. Besides outlining the theoretical framework, the authors also present a case study for Turkey.

Suggested Citation

  • Budina, Nina & van Wijnbergen, Sweder, 2007. "Quantitative approaches to fiscal sustainability analysis : a new World Bank tool applied to Turkey," Policy Research Working Paper Series 4169, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4169
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    References listed on IDEAS

    as
    1. Van Wijnbergen, Sweder, 1985. "Trade reform, aggregate investment and capital flight : On credibility and the value of information," Economics Letters, Elsevier, vol. 19(4), pages 369-372.
    2. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
    3. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2001. "Prospective Deficits and the Asian Currency Crisis," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1155-1197, December.
    4. Peter S. Heller, 2005. "Understanding Fiscal Space," IMF Policy Discussion Papers 05/4, International Monetary Fund.
    5. Oya Celasun & Xavier Debrun & Jonathan D. Ostry, 2006. "Primary Surplus Behavior and Risks to Fiscal Sustainability in Emerging Market Countries: A "Fan-Chart" Approach," IMF Staff Papers, Palgrave Macmillan, vol. 53(3), pages 1-3.
    6. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    7. Ritu Anand & Sweder van Wijnbergen, 1988. "Inflation, External Debt and Financial Sector Reform: A Quantitative Approach To Consistent Fiscal Policy With An Application to Turkey," NBER Working Papers 2731, National Bureau of Economic Research, Inc.
    8. Craig Burrnside, 2005. "Fiscal Sustainability in Theory and Practice : A Handbook," World Bank Publications, The World Bank, number 7495, July.
    9. Willem H. Buiter, 1990. "Principles of Budgetary and Financial Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524139, March.
    10. Gill, Indermit & Pinto, Brian, 2005. "Public debt in developing countries : has the market-based model worked?," Policy Research Working Paper Series 3674, The World Bank.
    11. Thomas Baunsgaard, 2003. "Fiscal Policy in Nigeria; Any Role for Rules?," IMF Working Papers 03/155, International Monetary Fund.
    12. Anand, Ritu & van Wijnbergen, Sweder, 1989. "Inflation and the Financing of Government Expenditure: An Introductory Analysis with an Application to Turkey," World Bank Economic Review, World Bank Group, vol. 3(1), pages 17-38, January.
    13. Hana Polackova Brixi & Allen Schick, 2002. "Government at Risk : Contingent Liabilities and Fiscal Risk," World Bank Publications, The World Bank, number 15233, July.
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    Citations

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    Cited by:

    1. World Bank, 2007. "Montenegro - Debt Sustainability Analysis," World Bank Other Operational Studies 12493, The World Bank.
    2. Juan Carlos Cuestas & Karsten Staehr, 2013. "Fiscal shocks and budget balance persistence in the EU countries from Central and Eastern Europe," Applied Economics, Taylor & Francis Journals, vol. 45(22), pages 3211-3219, August.
    3. repec:rss:jnljse:v1i4p2 is not listed on IDEAS
    4. Bandiera, Luca & Budina, Nina & Klijn, Michel & van Wijnbergen, Sweder, 2007. "The"how to"of fiscal sustainability : a technical manual for using the fiscal sustainability tool," Policy Research Working Paper Series 4170, The World Bank.

    More about this item

    Keywords

    Economic Theory&Research; External Debt; Economic Stabilization; Banks&Banking Reform; Public Sector Economics&Finance;

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