Predicting Fiscal Crises

43 Pages Posted: 22 Aug 2018

See all articles by Svetlana Cerovic

Svetlana Cerovic

International Monetary Fund (IMF)

Kerstin Gerling

International Monetary Fund (IMF)

Andrew Hodge

International Monetary Fund (IMF)

Paulo A. Medas

International Monetary Fund (IMF)

Date Written: August 2018

Abstract

This paper identifies leading indicators of fiscal crises based on a large sample of countries at different stages of development over 1970-2015. Our results are robust to different methodologies and sample periods. Previous literature on early warning sistems (EWS) for fiscal crises is scarce and based on small samples of advanced and emerging markets, raising doubts about the robustness of the results. Using a larger sample, our analysis shows that both nonfiscal (external and internal imbalances) and fiscal variables help predict crises among advanced and emerging economies. Our models performed well in out-of-sample forecasting and in predicting the most recent crises, a weakness of EWS in general. We also build EWS for low income countries, which had been overlooked in the literature.

Keywords: Taxation, Low income countries, Debt, Debt management, Fiscal policy, Fiscal crises, Early Warning System, Public Expenditures, Investment, and Finance, Studies of Particular Policy Episodes

JEL Classification: H63, E62, E65, E66, F47, G01

Suggested Citation

Cerovic, Svetlana and Gerling, Kerstin and Hodge, Andrew and Medas, Paulo A., Predicting Fiscal Crises (August 2018). IMF Working Paper No. 18/181. Available at SSRN: https://ssrn.com/abstract=3236796

Svetlana Cerovic (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Kerstin Gerling

International Monetary Fund (IMF) ( email )

Andrew Hodge

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Paulo A. Medas

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
61
rank
344,045
Abstract Views
360
PlumX Metrics