Leading Indicators Of Fiscal Distress

Author : Martin Bruns,Mr.Tigran Poghosyan
Publisher : International Monetary Fund
Page : 37 pages
File Size : 46,8 Mb
Release : 2016-02-15
Category : Business & Economics
ISBN : 9781475594799

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Leading Indicators of Fiscal Distress by Martin Bruns,Mr.Tigran Poghosyan Pdf

Early warning systems (EWS) are widely used for assessing countries’ vulnerability to fiscal distress. Most EWS employ a specific set of only fiscal leading indicators predetermined by the researchers, which casts doubt on their robustness. We revisit this issue by using the Extreme Bound Analysis, which allows identifying robust leading indicators of fiscal distress from a large set. Consistent with the theoretical predictions of latest generation crisis models, we find that both fiscal (e.g., fiscal balance, foreign exchange debt) and non-fiscal leading indicators (e.g., output, FX reserves, current account balance, and openness) are robust. In addition, we find that a fiscal vulnerability indicator based on fiscal and non-fiscal leading indicators offers a 29% gain in predictive power compared to a traditional one based on fiscal leading indicators only. It also has good predictive power out of sample, with 78 percent of crises predicted correctly and only 34 percent false alarms issued for the period 2008–15. This suggests that both fiscal and non-fiscal leading indicators should be taken into account when assessing country’s vulnerability to fiscal distress.

Author : Anonim
Publisher : Unknown
Page : 128 pages
File Size : 50,5 Mb
Release : 2024-07-02
Category : Electronic
ISBN : 1498342485

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Leading Indicators of Fiscal Distress by Anonim Pdf

Author : Ms.Svetlana Cerovic,Mrs.Kerstin Gerling,Andrew Hodge,Paulo Medas
Publisher : International Monetary Fund
Page : 42 pages
File Size : 51,5 Mb
Release : 2018-08-03
Category : Business & Economics
ISBN : 9781484372913

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Predicting Fiscal Crises by Ms.Svetlana Cerovic,Mrs.Kerstin Gerling,Andrew Hodge,Paulo Medas Pdf

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.

Author : Mr.Emanuele Baldacci,Mr.James McHugh,Iva Petrova
Publisher : International Monetary Fund
Page : 22 pages
File Size : 51,5 Mb
Release : 2011-04-01
Category : Business & Economics
ISBN : 9781455253333

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Measuring Fiscal Vulnerability and Fiscal Stress by Mr.Emanuele Baldacci,Mr.James McHugh,Iva Petrova Pdf

This paper proposes a set of fiscal indicators to assess rollover risks using the conceptual framework developed by Cottarelli (2011). These indicators provide early warning signals about the manifestation of these risks, giving policymakers the opportunity to adjust policies before extreme fiscal stress events. Two aggregate indices are calculated: an index of fiscal vulnerability and an index of fiscal stress. Results show that both indices are elevated for advanced economies, reflecting unfavorable medium-term debt dynamics and aging-related spending pressures. In emerging economies, solvency risks are lower, but the composition of public debt remains a source of risk and the fiscal position is weaker than before the crisis.

Author : Iva Petrova,Nazim Belhocine,MissGabriela Dobrescu,Mr.Emanuele Baldacci
Publisher : International Monetary Fund
Page : 43 pages
File Size : 44,6 Mb
Release : 2011-05-01
Category : Business & Economics
ISBN : 9781455254316

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Assessing Fiscal Stress by Iva Petrova,Nazim Belhocine,MissGabriela Dobrescu,Mr.Emanuele Baldacci Pdf

This paper develops a new index which provides early warning signals of fiscal sustainability problems for advanced and emerging economies. Unlike previous studies, the index assesses the determinants of fiscal stress periods, covering public debt default as well as near-default events. The fiscal stress index depends on a parsimonious set of fiscal indicators, aggregated using the approach proposed by Kaminsky, Lizondo and Reinhart (1998). The index is used to assess the build up of fiscal stress over time since the mid-1990s in advanced and emering economies. Fiscal stress has increased recently to record-high levels in advanced countries, reflecting raising solvency risks and financing needs. In emerging economies, risks are lower than in mature economies owing to sounder fiscal fundamentals, but fiscal stress remains higher than before the crisis.

Author : Graciela Laura Kaminsky
Publisher : International Monetary Fund
Page : 44 pages
File Size : 41,6 Mb
Release : 1997-07-01
Category : Business & Economics
ISBN : 9781451955866

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Leading Indicators of Currency Crises by Graciela Laura Kaminsky Pdf

This paper examines the empirical evidence on currency crises and proposes a specific early warning system. This system involves monitoring the evolution of several indicators that tend to exhibit an unusual behavior in the periods preceding a crisis. When an indicator exceeds a certain threshold value, this is interpreted as a warning “signal” that a currency crisis may take place within the following 24 months. The variables that have the best track record within this approach include exports, deviations of the real exchange rate from trend, the ratio of broad money to gross international reserves, output, and equity prices.

Author : Mrs.Kerstin Gerling,Mr.Paulo A Medas,Mr.Tigran Poghosyan,Juan Farah-Yacoub,Yizhi Xu
Publisher : International Monetary Fund
Page : 43 pages
File Size : 42,9 Mb
Release : 2017-04-03
Category : Business & Economics
ISBN : 9781475592153

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Fiscal Crises by Mrs.Kerstin Gerling,Mr.Paulo A Medas,Mr.Tigran Poghosyan,Juan Farah-Yacoub,Yizhi Xu Pdf

A key objective of fiscal policy is to maintain the sustainability of public finances and avoid crises. Remarkably, there is very limited analysis on fiscal crises. This paper presents a new database of fiscal crises covering different country groups, including low-income developing countries (LIDCs) that have been mostly ignored in the past. Countries faced on average two crises since 1970, with the highest frequency in LIDCs and lowest in advanced economies. The data sheds some light on policies and economic dynamics around crises. LIDCs, which are usually seen as more vulnerable to shocks, appear to suffer the least in crisis periods. Surprisingly, advanced economies face greater turbulence (growth declines sharply in the first two years of the crisis), with half of them experiencing economic contractions. Fiscal policy is usually procyclical as countries curtail expenditure growth when economic activity weakens. We also find that the decline in economic growth is magnified if accompanied by a financial crisis.

Author : International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
Page : 104 pages
File Size : 44,8 Mb
Release : 1999-01-01
Category : Business & Economics
ISBN : 9781462332373

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IMF Staff papers by International Monetary Fund. Research Dept. Pdf

This paper examines determinants and leading indicators of banking crises. The paper examines episodes of banking system distress and crisis in a large sample of countries to identify which macroeconomic and financial variables can be useful leading indicators. The best warning signs of the recent Asian crises were proxies for the vulnerability of the banking and corporate sector. Full-blown banking crises are shown to be associated more with external developments, and domestic variables are the main leading indicators of severe but contained banking distress.

Author : Magdalena Tomczynska
Publisher : Unknown
Page : 0 pages
File Size : 41,8 Mb
Release : 2009
Category : Electronic
ISBN : OCLC:1376482809

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Early Indicators of Currency Crises; Review of Some Literature by Magdalena Tomczynska Pdf

Financial crises have become relatively frequent events since the beginning of the 1980s. They have taken three main forms: currency crises, banking crises, or both - so called twin crises. As the number of developed economies, developing countries, and economies in transition experienced severe financial crashes researchers are trying to propose a framework for systemic analyses. That is why attempts to advance the understanding of features leading to the outbreak of financial crisis as well as the reasons of vulnerability have become more and more important. In recent years a number of efforts have been undertaken to identify variables that act as early warning signals for crises. The purpose of this paper is to provide some perspective on the issue of early warning signals of vulnerability to currency crises. In particular, it is aimed at presenting and highlighting the main findings of theoretical literature in this area. An effective warning system should consider a broad variety of indicators, as currency crises seem to be usually associated with multiple economic and sometimes political problems. Indicators that have proven to be particularly useful in anticipating crises and received empirical support include the development of international reserves, real exchange rate, domestic credit, credit to the public sector, domestic inflation, and structure and financing of public debt. Other indicators that have found support are trade balance, export performance, money growth, M2/international reserves ratio, foreign interest rates, real GDP growth, and fiscal deficit. Many of the proposed leading indicators have been able to predict particular crises, however, only few have showed ability to do so consistently. Generally, economic models can be said to be more successful in predicting crises that erupt because of weak fundamentals, which make country vulnerable to adverse shocks. They are less likely in anticipating crises due to selffulfilling expectations or pure contagion effects. So far economists are only able to identify situations in which an economy could face the risk of a financial crisis. This is most because of the well-known fact that if we knew the crisis would have already occurred. Warning indicators seem to be unlikely to predict crises in precise way but their analyses can provide extended information about impending problems what enables to take preventive measures.

Author : Asian Development Bank
Publisher : Asian Development Bank
Page : 117 pages
File Size : 46,9 Mb
Release : 2015-09-01
Category : Business & Economics
ISBN : 9789292570903

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Financial Soundness Indicators for Financial Sector Stability in Viet Nam by Asian Development Bank Pdf

Financial soundness indicators (FSIs) are methodological tools that help quantify and qualify the soundness and vulnerabilities of financial systems according to five areas of interests: capital adequacy, asset quality, earnings, liquidity, and sensitivity to market risk. With support from the Investment Climate Facilitation Fund under the Regional Cooperation and Integration Financing Facility, this report describes the development of FSIs for Viet Nam and analyzes the stability and soundness of the Vietnamese banking system by using these indicators. The key challenges to comprehensively implementing reforms and convincingly addressing the root causes of the banking sector problems include (i) assessing banks' recapitalization needs, (ii) revising classification criteria to guide resolution options, (iii) recapitalization and restructuring that may include foreign partnerships, (iv) strengthening the Vietnam Asset Management Company, (v) developing additional options to deal with nonperforming loans, (vi) tightening supervision to ensure a sound lending practice, (vii) revamping the architecture and procedures for crisis management, and (viii) strengthening financial safety nets during the reform process.

Author : Mr.Jiro Honda,Rene Tapsoba,Ismael Issifou
Publisher : International Monetary Fund
Page : 37 pages
File Size : 51,5 Mb
Release : 2018-04-06
Category : Business & Economics
ISBN : 9781484351901

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When Do We Repair the Roof? Insights from Responses to Fiscal Crisis Early Warning Signals by Mr.Jiro Honda,Rene Tapsoba,Ismael Issifou Pdf

Should policymakers wait for fiscal crisis early warning signals before repairing the roof? We give an answer to this question by investigating the interlinkages between early warning signals for fiscal crisis, policy responses, and policy outcomes, using a broad panel of 119 countries. We find that fiscal adjsutment is a good remedy for countries that act proactively, reducing their likelihood of facing fiscal crisis by up to about 60 percent. For those waiting for wake-up calls from early-detection tools, however, fiscal adjustment may not fully prevent fiscal crisis occurrence, with the chance of fiscal crisis prevention not only smaller (about 30 percent) but also statistically not significant. These findings highlight the prominence of repairing the roof when the sun is shining, particularly in countries with weak institutions.

Author : M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara
Publisher : World Bank Publications
Page : 403 pages
File Size : 45,6 Mb
Release : 2021-03-03
Category : Business & Economics
ISBN : 9781464815454

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Global Waves of Debt by M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara Pdf

The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 88 pages
File Size : 50,7 Mb
Release : 2014-12-22
Category : Business & Economics
ISBN : 9781498342438

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From Banking to Sovereign Stress - Implications For Public Debt by International Monetary Fund Pdf

This paper explores how banking sector developments and characteristics influence the propagation of risks from the banking sector to sovereign debt, including how they affect the extent of fiscal costs of banking crises when those occur. It then proposes practices and policies for the fiscal authorities to help manage the risks and enhance crisis preparedness.

Author : Ms. Rina Bhattacharya,Kubi Johnson,Ms. Mwanza Nkusu,Mengxue Wang
Publisher : International Monetary Fund
Page : 42 pages
File Size : 45,8 Mb
Release : 2022-12-02
Category : Business & Economics
ISBN : 9798400227776

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Fiscal Crises: The Role of the Public Debt Investor Base and Domestic Financial Markets as Aggravating and Mitigating Factors by Ms. Rina Bhattacharya,Kubi Johnson,Ms. Mwanza Nkusu,Mengxue Wang Pdf

The paper evaluates the key drivers of fiscal crises in a sample of countries from all three income groups—advanced, emerging, and low-income countries, using fiscal crisis data recently developed by the IMF’s Fiscal Affairs Department. The empirical study focuses on three questions: (1) How does the composition of debtholders (domestic vs. foreign, resident vs. non-resident, or official vs. non-official) affect the probability of a fiscal crisis, after controlling for the level of public debt and other relevant variables?; (2) How does the development and size of the domestic financial sector affect the probability of a fiscal crisis?; and (3) How do changes in the debt level affect the probability of a fiscal crisis, for given compositions of the sovereign debt investor base and different levels of development and size of domestic financial markets? Our findings confirm the benefits of financial development, the danger of heavy reliance on a non-resident investor base, and also that emerging market economies have a lower debt carrying capacity compared to the full sample.

Author : Mr.Mahinder Singh Gill,Mr.Paul Louis Ceriel Hilbers,Mr.Alfredo Mario Leone,Mr.Owen Evens
Publisher : INTERNATIONAL MONETARY FUND
Page : 0 pages
File Size : 42,9 Mb
Release : 2000-04-15
Category : Business & Economics
ISBN : 1557758913

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Macroprudential Indicators of Financial System Soundness by Mr.Mahinder Singh Gill,Mr.Paul Louis Ceriel Hilbers,Mr.Alfredo Mario Leone,Mr.Owen Evens Pdf

Following the severe financial crises of the 1990s, identifying and assessing financial sector vulnerabilities has become a key priority of the international community. The costly disruptions in global markets underscored the need to establish a set of monitorable variables for evaluating strengths and weaknesses in financial institutions and to alert authorities of impending problems. These variables, indicators, of financial system health and stability known collectively as macroprudential indicators, are the subject of this Occasional Paper by the Monetary and Exchange Affairs Department and the Statistics Department. Macroprudential indicators take measures at both the level of aggregated financial institutions and at the macroeconomic level; financial crises often occur when weaknesses are identified in both. The authors provide a breakdown and explanations of these indicators and a review of the theoretical and empirical work done thus far. Work at other international and multilateral institutions is included as well as the experiences of several national central banks and supervisory agencies. This paper provides a valuable reference source of current knowledge about macroprudential indicators and issues related to their analysis, identification, measurement, and possible dissemination.