Predicting Fiscal Crises

Author/Editor:

Svetlana Cerovic ; . Kerstin Gerling ; Andrew Hodge ; Paulo A Medas

Publication Date:

August 3, 2018

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper identifies leading indicators of fiscal crises based on a large sample of countries at different stages of development over 1970-2015. Our results are robust to different methodologies and sample periods. Previous literature on early warning sistems (EWS) for fiscal crises is scarce and based on small samples of advanced and emerging markets, raising doubts about the robustness of the results. Using a larger sample, our analysis shows that both nonfiscal (external and internal imbalances) and fiscal variables help predict crises among advanced and emerging economies. Our models performed well in out-of-sample forecasting and in predicting the most recent crises, a weakness of EWS in general. We also build EWS for low income countries, which had been overlooked in the literature.

Series:

Working Paper No. 2018/181

Subject:

English

Publication Date:

August 3, 2018

ISBN/ISSN:

9781484372555/1018-5941

Stock No:

WPIEA2018181

Pages:

42

Please address any questions about this title to publications@imf.org