Assessing Fiscal Stress

By Gabriela Dobrescu, Iva Petrova, Nazim Belhocine, Emanuele Baldacci

May 1, 2011

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Gabriela Dobrescu, Iva Petrova, Nazim Belhocine, and Emanuele Baldacci. Assessing Fiscal Stress, (USA: International Monetary Fund, 2011) accessed October 6, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper develops a new index which provides early warning signals of fiscal sustainability problems for advanced and emerging economies. Unlike previous studies, the index assesses the determinants of fiscal stress periods, covering public debt default as well as near-default events. The fiscal stress index depends on a parsimonious set of fiscal indicators, aggregated using the approach proposed by Kaminsky, Lizondo and Reinhart (1998). The index is used to assess the build up of fiscal stress over time since the mid-1990s in advanced and emering economies. Fiscal stress has increased recently to record-high levels in advanced countries, reflecting raising solvency risks and financing needs. In emerging economies, risks are lower than in mature economies owing to sounder fiscal fundamentals, but fiscal stress remains higher than before the crisis.

Subject: Financial crises, Fiscal risks, Government finance statistics, Macro-fiscal analysis, Public debt

Keywords: Debt, Default, Economy, Emerging economy, WP

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/100
Stock No:

WPIEA2011100
ISBN:

9781455254316
ISSN:

1018-5941

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