Measuring Fiscal Vulnerability and Fiscal Stress: A Proposed Set of Indicators

Author/Editor:

James McHugh ; Iva Petrova ; Emanuele Baldacci

Publication Date:

April 1, 2011

Electronic Access:

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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 proposes a set of fiscal indicators to assess rollover risks using the conceptual framework developed by Cottarelli (2011). These indicators provide early warning signals about the manifestation of these risks, giving policymakers the opportunity to adjust policies before extreme fiscal stress events. Two aggregate indices are calculated: an index of fiscal vulnerability and an index of fiscal stress. Results show that both indices are elevated for advanced economies, reflecting unfavorable medium-term debt dynamics and aging-related spending pressures. In emerging economies, solvency risks are lower, but the composition of public debt remains a source of risk and the fiscal position is weaker than before the crisis.

Series:

Working Paper No. 2011/094

Subject:

Asset and liability management Debt refinancing Fiscal risks Fiscal stance Public debt

English

Publication Date:

April 1, 2011

ISBN/ISSN:

9781455253333/1018-5941

Stock No:

WPIEA2011094

Pages:

20

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