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Predicting Fiscal Crises
Author:
Ms. Svetlana Cerovic
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,
Mrs. Kerstin Gerling
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,
Andrew Hodge
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Mr. Paulo A Medas
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Series:
IMF Working Papers
Volume/Issue:
Volume 2018: Issue 181
Language:
English
Publication Date:
03 Aug 2018
DOI:
https://doi.org/10.5089/9781484372555.001
ISBN:
9781484372555
ISSN:
1018-5941
Pages:
42
Keywords:
WP; fiscal crisis; crisis run-up; crisis probability; approaching crisis; crises start; debt crisis; missed crisis
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund