## Assessing Fiscal Stress

_IMF Working Papers, May 1, 2011_

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## Bibliographic details
- Authors: Gabriela Dobrescu, Iva Petrova, Nazim Belhocine, Emanuele Baldacci
- Published: May 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455254316.001

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### 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.

### Methodology and Indicators
- Index construction:
  - Depends on a parsimonious set of fiscal indicators.
  - Aggregation method: approach proposed by Kaminsky, Lizondo and Reinhart (1998).
- Coverage:
  - Assesses determinants of fiscal stress periods, including public debt default and near-default events.
  - Time frame: build up of fiscal stress over time since the mid-1990s.
- Country groups:
  - Advanced economies are highlighted as having record-high fiscal stress recently.
  - Emerging economies show lower risks than mature economies but remain above pre-crisis levels.

### Key Findings
- Fiscal stress trends:
  - Fiscal stress has increased recently to record-high levels in advanced countries.
  - In emerging economies, fiscal stress remains higher than before the crisis despite lower risks relative to mature economies.
- Risk drivers:
  - Raising solvency risks and financing needs are associated with the rise in fiscal stress in advanced countries.
- Comparative assessment:
  - Emerging economies benefit from sounder fiscal fundamentals relative to mature economies, contributing to lower risks.

### Subject Areas and Keywords
- Subject: Financial crises, Fiscal risks, Government finance statistics, Macro-fiscal analysis, Public debt
- Keywords: debt, default, economy, emerging economy, WP

*Source: IMF Working Papers — "Assessing Fiscal Stress" (Working Paper No. 2011/100, May 1, 2011).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/assessing-fiscal-stress-24822_