Refinements to the Probabilistic Approach to Fiscal Sustainability Analysis
This paper relaxes some key assumptions in the probabilistic approach to fiscal sustainability. First, the authors identify structural breaks over the sample period used to estimate the covariance matrix of the shocks to the debt ratios. Second, th...
| Main Authors: | , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2008/09/9820457/refinements-probabilistic-approach-fiscal-sustainability-analysis http://hdl.handle.net/10986/6776 |
| Summary: | This paper relaxes some key assumptions
in the probabilistic approach to fiscal sustainability.
First, the authors identify structural breaks over the
sample period used to estimate the covariance matrix of the
shocks to the debt ratios. Second, the assumption of
normality of the shocks is dropped by modeling their
respective empirical distribution directly, which makes it
possible to quantify asymetries and thick tails. Third, the
use of fiscal reaction functions is avoided by focusing
attention on debt-stabilizing balances. |
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