Quantitative Approaches to Fiscal Sustainability Analysis: A New World Bank Tool Applied to Turkey

41 Pages Posted: 20 Apr 2016

See all articles by Nina Budina

Nina Budina

World Bank

Sweder van Wijnbergen

Universiteit van Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: March 1, 2007

Abstract

Fiscal sustainability analysis (FSA) is an important component of macroeconomic analysis. The authors review various quantitative approaches to FSA with a major objective to bring these approaches together and to present a user-friendly tool for FSA that reflects modern developments. They combine a dynamic simulations approach with a simplified version of the steady-state consistency approach. They also incorporate two different methods to deal with uncertainty: user-defined stress tests and stochastic simulations. The tool goes further by evaluating the required fiscal adjustment as a consequence of the stochastic realizations of the exogenous variables. Furthermore, the fiscal sustainability tool incorporates an endogenous debt feedback rule for the primary surplus, a fiscal policy reaction function. Besides outlining the theoretical framework, the authors also present a case study for Turkey.

Keywords: Economic Theory & Research, External Debt, Economic Stabilization, Banks & Banking Reform, Public Sector Economics & Finance

Suggested Citation

Budina, Nina and van Wijnbergen, Sweder, Quantitative Approaches to Fiscal Sustainability Analysis: A New World Bank Tool Applied to Turkey (March 1, 2007). World Bank Policy Research Working Paper No. 4169. Available at SSRN: https://ssrn.com/abstract=972702

Nina Budina (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Sweder Van Wijnbergen

Universiteit van Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4011 / 4203 (Phone)
+31-35-624 91 82 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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