Assessing fiscal sustainability in some selected countries

Cruz-Rodríguez, Alexis (2014): Assessing fiscal sustainability in some selected countries.

Abstract

The aim of this article is to assess the sustainability of fiscal policy in 18 developing and emerging countries, using the recursive algorithm developed by Croce and Juan-Ramón (2003). In general, the results suggest that most countries were identified as presenting large unsustainable fiscal positions in the period considered, explained basically by primary fiscal deficits. Interestingly, results for Panama suggest no evidence that officially dollarized countries run more prudent fiscal policies than non-officially dollarized countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Debt, deficit, fiscal sustainability
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy; H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit ; Surplus

References

Barnhill, T. M. and Kopits, G. (2004). Assessing fiscal sustainability under uncertainty. The Journal of Risk, 6(4):31-53.

Barro, R. J. (1976). Reply to Feldstein and Buchanan. Journal of Political Economy, 84(2):343-349.

Belhocine, N. and Dell’Erba, S. (2013). The impact of debt sustainability and the level of debt on Emerging Markets spreads. Working Paper WP/13/93, International Monetary Fund.

Blanchard, O. J. (1990). Suggestions for new set of fiscal indicators. Working Paper 79, OEDC.

Blanchard, O. J., Chouraqui, J.-C., Hagemann, R. P., and Sartor, N. (1990). The sustainability of fiscal policy: New answers to an old question. OCDE Economic Studies, (15):7-35.

Budina, N. and van Wijnbergen, S. (2009). Quantitative approaches to fiscal sustainability analysis: A case study of Turkey since the crisis of 2001. World Bank Economic Review, 23(1):119-140.

Buiter, W. H. (1985). Guide to public sector debt and deficits. Economy Policy, 1(1):13-79.

Burnside, C. (2004). Assessing new sustainability analysis. Mimeo, World Bank.

Calvo, G. A., Izquierdo, A., y Talvi, E. (2003). Sudden stops, the real exchange rate and fiscal sustainability: Argentina’s lessons. Working Paper 9828, National Bureau of Economic Research.

Celasun, O., Debrun, X. and Ostry, J. D. (2007). Primary Surplus Behavior and risks to Fiscal Sustainability in Emerging Market countries: A “Fan-Chart” approach. IMF Staff Papers, 53(3):401-425.

Chalk, N. and Hemming, R. (2000). Assessing fiscal sustainability in theory and practice. Working Paper WP/00/81, International Monetary Fund.

Croce, E. and Juan-Ramón, V. H. (2003). Assessing fiscal sustainability: A cross-country comparison. Working Paper WP/03/145, International Monetary Fund.

Díaz Alvarado, C., Izquierdo, A., and Panizza, U. (2004). Fiscal sustainability in Emerging Market countries with an application to Ecuador. Working Paper 511, Inter-American Development Bank.

Edwards, S. (2001). Dollarization myths and realities. Journal of Policy Modeling, 23(2):249-265.

Frank, N. and Ley, N. (2009). On the probabilistic approach to fiscal sustainability: Structural breaks and non-normality. IMF Staff Papers, 56(4):742-757.

Galindo, A. and Izquierdo, A. (2003). Sudden stops and Exchange rate strategies in Latin America. Working Paper 484, Inter-American Development Bank.

Ghosh, A. R., Kim, J. I., Mendoza, E., Ostry, J. D. and Qureshi, M. S. (2013). Fiscal fatigue, space and debt sustainability in advanced economies. The Economic Journal, 123(566):F4-F30.

Greenlaw, D.; Hamilton, J. D.; Hooper, P. and Mishkin, F. S. (2013). Cruch time: Fiscal crises and the role of monetary policy. Working Paper 19297. National Bureau of Economic Research.

Hamilton, J. D. and Flavin, M. A. (1986). On the limitations of government borrowing: A framework for empirical testing. American Economic Review, 76(4):809-819.

Horne, J. (1991). Indicators of fiscal sustainability. Working Paper WP/91/5, International Monetary Fund.

Hostland, D. and Karam, P. (2005). Assessing debt sustainability in Emerging Market economies using stochastic simulation methods. Working Paper WP/05/226, International Monetary Fund.

IMF (2002). Assessing sustainability. Mimeo, Policy Development and Review Department, International Monetary Fund.

IMF (2003). Sustainability assessments-review of application and methodological refinements. Mimeo, Policy Development and Review Department, International Monetary Fund.

Mendoza, E. G. and Oviedo, P. M. (2006). Fiscal policy and macroeconomic uncertainty in developing countries: The tale of the tormented insurer. Working Paper 12586, National Bureau of Economic Research.

Mendoza, E. G. and Oviedo, P. M. (2009). Public debt, fiscal solvency and macroeconomic uncertainty in Latin America: The cases of Brazil, Colombia, Costa Rica and Mexico. Economía Mexicana: Nueva Época, XVIII(2):133-173.

Mora, H. (2004). Assessing fiscal sustainability with alternative methodologies. Ensayos sobre Política Económica, 46(I):82-45.

Perotti, R. (2007). Fiscal policy in Developing Countries: A framework and some questions. Policy Research Working Paper 4365, The Work Bank.

Talvi, E. and Végh, C. A. (2000). La sostenibilidad de la política fiscal: Un marco básico. In Talvi, E. and Végh, C. A., editors, ¿Cómo armar el rompecabezas fiscal?, pages 1-25. Banco Interamericano de Desarrollo, Washington, D. C.

Tanner, E. (2013). Fiscal sustainability: A 21st century guide for the perplexed. Working Paper WP/13/89, International Monetary Fund.

Reinhart, C.; Savastano, M. and Rogoff, K. S. (2003). Debt intolerance. Brooking Papers on Economic Activity, 2003(1):1-62.

Xu, D. and Ghezzi, P. (2002). From fundamentals to spreads: A fair spread model for high yield Emerging Markets sovereigns. Mimeo, Deutsche Bank.