On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-normality

This paper modifies several assumptions in the probabilistic approach to fiscal sustainability proposed by Celasun, Debrun, and Ostry (2007). First, we allow for structural breaks in the vector autoregression model for the macroeconomic variables. Second, in the Monte-Carlo simulations, we draw dire...

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Main Authors:	Frank, Nathaniel, Ley, Eduardo
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Macroeconomics: Production E230 Fiscal Policy E620 National Debt Debt Management Sovereign Debt H630 Macroeconomic Analyses of Economic Development O110 Fiscal and Monetary Policy in Development O230
Online Access:	http://hdl.handle.net/10986/5746

id	okr-10986-5746
recordtype	oai_dc
spelling	okr-10986-57462021-04-23T14:02:23Z On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-normality Frank, Nathaniel Ley, Eduardo Macroeconomics: Production E230 Fiscal Policy E620 National Debt Debt Management Sovereign Debt H630 Macroeconomic Analyses of Economic Development O110 Fiscal and Monetary Policy in Development O230 This paper modifies several assumptions in the probabilistic approach to fiscal sustainability proposed by Celasun, Debrun, and Ostry (2007). First, we allow for structural breaks in the vector autoregression model for the macroeconomic variables. Second, in the Monte-Carlo simulations, we draw directly from the empirical distribution of the shocks instead of drawing from a normal distribution, thus allowing for asymmetries and thick tails. Third, we circumvent the use of a fiscal reaction function by focusing attention instead on debt-stabilizing balances, to produce more "agnostic" debt projections. The paper illustrates how these methodological modifications have significant impacts on the results for specific country cases. 2012-03-30T07:34:20Z 2012-03-30T07:34:20Z 2009 Journal Article Imf Staff Papers 10207635 http://hdl.handle.net/10986/5746 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Macroeconomics: Production E230 Fiscal Policy E620 National Debt Debt Management Sovereign Debt H630 Macroeconomic Analyses of Economic Development O110 Fiscal and Monetary Policy in Development O230
spellingShingle	Macroeconomics: Production E230 Fiscal Policy E620 National Debt Debt Management Sovereign Debt H630 Macroeconomic Analyses of Economic Development O110 Fiscal and Monetary Policy in Development O230 Frank, Nathaniel Ley, Eduardo On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-normality
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	This paper modifies several assumptions in the probabilistic approach to fiscal sustainability proposed by Celasun, Debrun, and Ostry (2007). First, we allow for structural breaks in the vector autoregression model for the macroeconomic variables. Second, in the Monte-Carlo simulations, we draw directly from the empirical distribution of the shocks instead of drawing from a normal distribution, thus allowing for asymmetries and thick tails. Third, we circumvent the use of a fiscal reaction function by focusing attention instead on debt-stabilizing balances, to produce more "agnostic" debt projections. The paper illustrates how these methodological modifications have significant impacts on the results for specific country cases.
format	Journal Article
author	Frank, Nathaniel Ley, Eduardo
author_facet	Frank, Nathaniel Ley, Eduardo
author_sort	Frank, Nathaniel
title	On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-normality
title_short	On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-normality
title_full	On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-normality
title_fullStr	On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-normality
title_full_unstemmed	On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-normality
title_sort	on the probabilistic approach to fiscal sustainability: structural breaks and non-normality
publishDate	2012
url	http://hdl.handle.net/10986/5746
_version_	1764396161249050624

On the Probabilistic Approach to Fiscal Sustainability: Structural Breaks and Non-normality

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