Signalling Fiscal Stress in the Euro Area: A Country-Specific Early Warning System

31 Pages Posted: 26 Jul 2014

See all articles by Pablo Hernández de Cos

Pablo Hernández de Cos

Banco de España

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Gerrit Koester

European Central Bank (ECB)

Christiane Nickel

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: July 25, 2014

Abstract

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

Hernández de Cos, Pablo and Moral-Benito, Enrique and Koester, Gerrit B. and Nickel, Christiane, Signalling Fiscal Stress in the Euro Area: A Country-Specific Early Warning System (July 25, 2014). Banco de Espana Working Paper No. 1418. Available at SSRN: https://ssrn.com/abstract=2471464 or http://dx.doi.org/10.2139/ssrn.2471464

Pablo Hernández de Cos (Contact Author)

Banco de España ( email )

Madrid, 28014
Spain

Enrique Moral-Benito

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Gerrit B. Koester

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Christiane Nickel

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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