{
  "title": "A Probabilistic Approach to Fiscal Space and Prudent Debt Level: Application to Low-Income Developing Countries",
  "publication": "IMF Working Papers, August 5, 2016",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/a-probabilistic-approach-to-fiscal-space-and-prudent-debt-level-application-to-low-income-44171",
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  "summary": "What constitutes fiscal space or a prudent level of debt to conduct countercyclical policy while ensuring debt sustainability?",
  "sections": [
    {
      "heading": "Research question and methodology",
      "content": "- Addresses: \"What constitutes fiscal space or a prudent level of debt to conduct countercyclical policy while ensuring debt sustainability?\"\n- Method: explores the relationship between debt dynamics and the probabilistic distribution of the primary balance and the effective interest rate.\n- Use case: proposed approach is useful in situations where the lack of relevant data makes it difficult to estimate detailed fiscal reaction functions.\n- Application: applied to Low-Income Developing Countries (LIDCs) and evaluated under various debt ceiling assumptions."
    },
    {
      "heading": "Key findings",
      "content": "- About 60 percent of these countries presently have fiscal policy space to address adverse shocks, subject to the availability of domestic and external financing.\n- Countries with strong institutional capacity tend to have more fiscal space.\n- Countries with weak institutional capacity, mostly countries in conflict and fragile states, tend to lack fiscal space."
    },
    {
      "heading": "Implications and interpretation",
      "content": "- The probabilistic approach links stochastic behavior of the primary balance and effective interest rates directly to debt dynamics, offering an alternative where detailed fiscal reaction functions cannot be estimated.\n- Debt ceiling assumptions materially affect which LIDCs are judged to have fiscal space.\n- Institutional capacity is a central determinant of available fiscal space in the LIDC sample."
    },
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      "content": "- Authors: Olumuyiwa S Adedeji, Calixte Ahokpossi, Claudio Battiati, Mai Farid\n- Date: August 5, 2016\n- Series: Working Paper No. 2016/163\n- Issue: 163\n- Volume: 2016\n- Pages: 20\n- DOI: https://doi.org/10.5089/9781475523607.001\n- Stock No: WPIEA2016163\n- ISBN: 9781475523607\n- ISSN: 1018-5941\n- Subject: Asset and liability management, Debt limits, Fiscal policy, Fiscal rules, Fiscal space, Fiscal stance, Public debt\n- Keywords: debt dynamics, debt level, Debt limits, Fiscal rules, Fiscal space, Fiscal stance, low-income developing countries, WB debt threshold, WB DSF framework, WB DSF threshold, WB framework, WP\n\nIMF Working Paper — A Probabilistic Approach to Fiscal Space and Prudent Debt Level: Application to Low-Income Developing Countries\n\n---\n\n Content in this bundle\n\n- 1. Fiscal Space\n  - 1. Fiscal Space (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1. Fiscal Space (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/a-probabilistic-approach-to-fiscal-space-and-prudent-debt-level-application-to-low-income-44171"
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    "Authors: Olumuyiwa S Adedeji, Calixte Ahokpossi, Claudio Battiati, Mai Farid",
    "Published: August 5, 2016",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475523607.001",
    "Addresses: \"What constitutes fiscal space or a prudent level of debt to conduct countercyclical policy while ensuring debt sustainability?\"",
    "Method: explores the relationship between debt dynamics and the probabilistic distribution of the primary balance and the effective interest rate.",
    "Use case: proposed approach is useful in situations where the lack of relevant data makes it difficult to estimate detailed fiscal reaction functions.",
    "Application: applied to Low-Income Developing Countries (LIDCs) and evaluated under various debt ceiling assumptions.",
    "About 60 percent of these countries presently have fiscal policy space to address adverse shocks, subject to the availability of domestic and external financing.",
    "Countries with strong institutional capacity tend to have more fiscal space.",
    "Countries with weak institutional capacity, mostly countries in conflict and fragile states, tend to lack fiscal space.",
    "The probabilistic approach links stochastic behavior of the primary balance and effective interest rates directly to debt dynamics, offering an alternative where detailed fiscal reaction functions cannot be estimated.",
    "Debt ceiling assumptions materially affect which LIDCs are judged to have fiscal space.",
    "Institutional capacity is a central determinant of available fiscal space in the LIDC sample.",
    "Authors: Olumuyiwa S Adedeji, Calixte Ahokpossi, Claudio Battiati, Mai Farid",
    "Date: August 5, 2016",
    "Series: Working Paper No. 2016/163",
    "Issue: 163",
    "Volume: 2016",
    "Pages: 20",
    "DOI: https://doi.org/10.5089/9781475523607.001",
    "Stock No: WPIEA2016163",
    "ISBN: 9781475523607",
    "ISSN: 1018-5941",
    "Subject: Asset and liability management, Debt limits, Fiscal policy, Fiscal rules, Fiscal space, Fiscal stance, Public debt",
    "Keywords: debt dynamics, debt level, Debt limits, Fiscal rules, Fiscal space, Fiscal stance, low-income developing countries, WB debt threshold, WB DSF framework, WB DSF threshold, WB framework, WP",
    "**1. Fiscal Space**"
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