## Indicators of Fiscal Sustainability

_IMF Working Papers, January 1, 1991_

## Source details

**Canonical URL:** [Indicators of Fiscal Sustainability](https://www.imf.org/en/publications/wp/issues/2016/12/30/indicators-of-fiscal-sustainability-882)

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- [Markdown version](/en/publications/wp/issues/2016/12/30/indicators-of-fiscal-sustainability-882/index.md)
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## Bibliographic details
- Authors: Jocelyn Horne
- Published: January 1, 1991
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451842081.001

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### Overview and purpose
- Assesses the usefulness of summary measures of fiscal sustainability for the purpose of multilateral surveillance.
- Presents an overview of the main conceptual issues underlying fiscal sustainability measurement.
- Evaluates strengths and weaknesses of summary measures in the context of their recent application to industrial countries by the OECD and the Fund.

### Key findings
- Summary measures highlight the inadequacy of using trends in public debt ratios alone to assess sustainability.
- The measures are subject to a number of important caveats that limit their reliability and interpretation.

### Major caveats and sensitivities
- Sensitivity to the discount rate.
- Sensitivity to time paths of government expenditures.
- Sensitivity to private sector behavior.
- Implication: conclusions based solely on summary measures or debt-ratio trends can be misleading without careful attention to underlying assumptions.

### Conceptual issues emphasized
- Importance of present discounted value approaches and government budget constraints.
- Relevance of real interest rates and the public debt-to-GDP ratio for assessing fiscal sustainability.
- Consideration of debt stabilization and risks such as debt repudiation.

### Context of application
- Recent applications analyzed: OECD and IMF assessments of industrial countries.
- The paper demonstrates how different assumptions and methodologies can materially affect sustainability indicators and policy inferences.

### Subjects and keywords
- Subjects: Expenditure, Financial services, Fiscal policy, Fiscal sustainability, Public debt, Real interest rates
- Keywords: budget constraint, debt repudiation, debt stabilization, fiscal policy sustainability, Fiscal sustainability, GDP, Global, government solvency, present discounted value, public debt-to-GDP ratio, Real interest rates, stock ratio, WP

*IMF Working Paper: "Indicators of Fiscal Sustainability" by Jocelyn Horne, Working Paper No. 1991/005 (January 1, 1991).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/indicators-of-fiscal-sustainability-882_