Signalling Fiscal Stress in the Euro Area: A Country-Specific Early Warning System
31 Pages Posted: 26 Jul 2014
Date Written: July 25, 2014
The sovereign debt crisis in the euro area has raised interest in early warning indicators, aimed at signalling the build-up of fiscal stress in advance and helping prevent crises by means of a timely counteraction of fiscal and macroeconomic policies. This paper presents possible improvements to enhance existing early warning indicators for fiscal stress, especially for the euro area. We show that a country-specific approach could strongly increase the signalling power of early warning systems. Finally, we draw policy conclusions for the setting-up and application of a system of early warning indicators for fiscal stress.
Keywords: fiscal policy, studies of particular policy episodes, general outlook and conditions, deficit, surplus, debt, debt management, sovereign debt, international lending and debt problems
JEL Classification: E62, E65, E66, H62, H63, F34
Suggested Citation: Suggested Citation