Fiscal Sustainability Risk Assessment with Macroeconomic Factors

23 Pages Posted: 20 Jun 2011

See all articles by Istvan Abel

Istvan Abel

Budapest Business School

Adam Kobor

New York University (NYU)

Date Written: June 20, 2011

Abstract

Fiscal sustainability conditions for the Maastricht gross nominal consolidated public debt are analyzed using Hungarian data. The components of debt dynamics are grouped following the commonly used debts sustainability approach while the factors and their contributions to the changes of the debt are analyzed using a VAR model. The stochastic properties (variance) of macro variables used in the VAR model help to asses risks to fiscal sustainability. This approach offers a way to determine the effect of possible macroeconomic shocks on debt dynamics. Using stochastic simulation, we can estimate a confidence interval around the expected debt ratio path at pre-specified probability levels.

Keywords: Fiscal Debt, Debt Dynamics, Hungary, VAR(1) Model

JEL Classification: C32, E66, H68

Suggested Citation

Abel, Istvan and Kóbor, Ádám, Fiscal Sustainability Risk Assessment with Macroeconomic Factors (June 20, 2011). Available at SSRN: https://ssrn.com/abstract=1868543 or http://dx.doi.org/10.2139/ssrn.1868543

Istvan Abel

Budapest Business School ( email )

Buzogany u. 10-12
Budapest H-1149
Hungary

Ádám Kóbor (Contact Author)

New York University (NYU) ( email )

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