Probabilistic Sustainability of Public Debt: A Vector Autoregression Approach for Brazil, Mexico, and Turkey

WPIEA2006295 Image
Price:  $18.00

Author/Editor: Issouf Samaké, Evan Tanner
Release Date: © December, 2006
ISBN : 978-1-45186-555-4
Stock #: WPIEA2006295
Stock Status: Available

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This paper examines the sustainability of fiscal policy under uncertainty in three emerging market countries, Brazil, Mexico, and Turkey. For each country, we estimate a vector autoregression (VAR) that includes fiscal and macroeconomic variables. Retrospectively, a historical decomposition shows by how much debt accumulation reflects unsustainable policy, adverse shocks, or both. Prospectively, Monte Carlo techniques reveal the primary surplus that is required to keep the debt/GDP ratio from rising in all but the worst 50 percent, 25 percent, and 10 percent of circumstances. Such a value-at-risk approach presents a clearer menu of policy options than currently used frameworks.


Economic policy , Fiscal policy

More publications in this series: Working Papers

More publications by: Issouf Samaké ; Evan Tanner