Measuring Fiscal Vulnerability and Fiscal Stress

Abstract

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.Developed countries;Fiscal sustainability;Public debt;fiscal stress, fiscal vulnerability, fiscal variables, fiscal indicators, government debt, fiscal solvency, fiscal crisis, fiscal risks, short-term debt, net debt, fiscal balances, central bank, debt dynamics, fiscal policy, fiscal position, fiscal monitoring, budget constraint, external debt, sovereign debt, fiscal pressures, foreign debt, fiscal policies, primary fiscal balance, central banks, fiscal outlook, debt service, fiscal balance, fiscal adjustment, debt ratios, tax base, debt servicing, fiscal vulnerabilities, foreign currency debt, tax rates, debt crisis, fiscal imbalances, sovereign bond, domestic currency, debt management, current account, debt burden, fiscal consolidation efforts, fiscal costs, currency risks, fiscal events, fiscal developments, fiscal stance, debt ratio, debt stock, national debt, fiscal affairs, private debt, domestic absorption, fiscal analysis, balance of payment, debt defaults, currency debt, structural fiscal, budget constraints, fiscal affairs department, debt sustainability, fiscal consolidation, fiscal aggregates