Fiscal reaction functions
Estimates of how governments adjust primary balances in response to debt levels inform judgements about fiscal space and credibility.
GRA · Public Finance and Sovereign Debt
Spatial financeWhere capital meets hazard, exposure and transition
Econometrics for public finance and sovereign debt
Econometrics estimates relationships from fiscal and macroeconomic data and tests whether they hold. On this platform it supports estimates of revenue volatility, fiscal reaction functions, efficiency gaps and the effects of shocks on public debt.
01Naverok
Econometrics for public finance and sovereign debt in five parts.
02Serlêdan
What econometrics does here.
Econometrics applies statistical methods to economic data to estimate relationships, test theories and forecast. It provides empirical evidence on how shocks and policies affect economic outcomes. In sovereign and public finance, development finance and disaster and crisis, econometric evidence estimates how disasters, pandemics and financial shocks affect output, employment and prices. It informs the economic case for risk reduction. The canonical description is on the STEM Commons.
Revenue volatility
Commodity and tax revenue series are modelled to estimate volatility and its relationship with prices and output, informing buffer sizing.
Disaster effects on public finance
Panel data on past disasters estimate average effects on revenue, spending and debt, with heterogeneity across countries reported.
03Çavdêrî bike
Econometric model.
The screen a team would use to follow this method: its measures, states and decisions. Names are examples and values are illustrative.
Econometric model
Public finance and sovereign debt · Econometrics for public finance · Run R-5003
Estimates stableGRA · Public Finance and Sovereign Debt
Estimates
robust standard errors
| Public debt | 0.03 | 0.19 | [−0.4, 0.2] | Erê |
| Gross financing needs | 0.29 | 0.12 | [−0.2, 0.4] | Erê |
| Interest to revenue | 0.20 | 0.13 | [0.0, 0.5] | Na |
| Share of FX debt | 0.33 | 0.05 | [0.1, 0.9] | Erê |
Method card
- Rêbaz
- Ekonometrî
- Sample
- 1642 obs
- Sêwirandin
- panel, fixed effects
- Nîşan
- MODELKIRÎ
Residuals by group
04Dane
What the method consumes.
Datasets and records used by econometrics on this platform, with the role each plays and the label its values carry. Sources are listed in the source register.
| Dane | Rol | Nîşan |
|---|---|---|
| Fiscal time series | Estimation | Statîstîkên weşandî |
| Commodity price series | Revenue drivers | ÇAVDÊRÎKIRÎ |
| Disaster databases | Event data | REPORTED |
05Scenario model
Sovereign debt paths and the odds of breaching a threshold.
The distribution of debt paths, and the share above a threshold of concern at the horizon, that sovereign investors and rating analysts read from a fan chart. Teaching model with stated illustrative values, not a prediction.
- Median, 25% to 75% and 10% to 90% bands
- No shocks
Kontrol
- Debt today
- 70% of GDP
- Effective nominal interest rate
- 5.0%
- Nominal GDP growth
- 4.5%
- Primary balance
- −0.5% of GDP
- Volatility of growth
- 2.0 points
- Volatility of the interest rate
- 1.0 points
- Salên pêş
- 10 years
- Threshold of concern
- 90% of GDP
Xwendin
- Median debt at the horizon
- 79% of GDP
- Paths above the threshold at the horizon
- 3%
- Primary balance that stabilises debt
- 0.3% of GDP
Jimar, rêbaz û çavkanî
| Sal | 10% | 25% | Median | 75% | 90% |
|---|---|---|---|---|---|
| 0 | 70.0 | 70.0 | 70.0 | 70.0 | 70.0 |
| 1 | 68.8 | 69.7 | 70.9 | 72.0 | 73.1 |
| 2 | 68.6 | 70.1 | 71.5 | 73.1 | 74.6 |
| 3 | 68.9 | 70.7 | 72.5 | 74.3 | 76.1 |
| 4 | 69.2 | 71.3 | 73.3 | 75.5 | 77.5 |
| 5 | 69.4 | 71.8 | 74.5 | 76.7 | 79.2 |
| 6 | 69.9 | 72.7 | 75.3 | 77.7 | 80.8 |
| 7 | 70.6 | 73.1 | 76.2 | 79.0 | 81.9 |
| 8 | 71.2 | 74.0 | 77.1 | 80.2 | 83.3 |
| 9 | 71.9 | 74.8 | 77.8 | 81.2 | 84.4 |
| 10 | 72.0 | 75.2 | 78.7 | 82.0 | 85.7 |
Rêbaz
- Debt dynamics and the interest-growth differential Blanchard (2019), Public debt and low interest rates, American Economic Review 109
- Stochastic fan charts Celasun, Debrun and Ostry (2006), IMF Staff Papers 53
- Sovereign risk and debt sustainability framework IMF (2022), Staff Guidance Note on the SRDSF
Dane
No observed data enters this model: it runs on the teaching values set by the controls, to be replaced with a programme’s own evidence.
Li seranserê şeş stûnan, bi pêşengiya Nexus Consortium
- Ceribandin Labs
- Hatiye avakirin di Public Finance and Sovereign Debt in Foundry
- Tê ceribandin li Public Finance and Sovereign Debt in Universe
- Hatiye kodkirin di Darayî, sîgorta û aborî di Standards de
- Hatiye weşandin di Public Finance and Sovereign Debt in Reports
- Tê de tê dayîn Fakulteya Darayî û Aborî di Academy de
06Erêkirin
How results are checked.
Models are assessed through specification tests, robustness checks and out-of-sample performance. Results are compared across datasets and methods.
| Kontrol bikin | How it is done |
|---|---|
| Robustness | Results are checked across specifications and samples |
| Endogeneity | Methods to address reverse causality are stated |
| Out-of-sample | Models are tested on periods not used in estimation |
Endogeneity, measurement error and structural change can bias estimates. Relationships may shift under extreme conditions.
07Exposure, loss and capital
What it means for exposure, loss and capital.
The exposure, loss, scenario and capital views a risk officer, supervisor or ministry of finance would ask for, with the frameworks they report against. Structures follow supervisory and actuarial practice. Values are illustrative: never prices, ratings or advice.
Capital, solvency and fiscal indicators
The indicators a risk officer, supervisor or ministry of finance reads first on econometrics for public finance and sovereign debt.
| Indicator | Unit | Who reads it | Framework |
|---|---|---|---|
| Public debt | % of GDP | Ministries of finance, IMF | Debt Sustainability Framework |
| Gross financing needs | % of GDP per year | Ministries of finance, investors | Debt Sustainability Framework |
| Contingent liabilities | % of GDP, by source | Ministries of finance | Fiscal risk statements |
| Interest to revenue | % of revenue | Ministries of finance, rating users | Public finance statistics |
| Sovereign spread | basis points over a benchmark | Investors, debt managers | Market data |
| CET1 ratio | % of risk-weighted assets | Banks, supervisors | Basel framework |
| Liquidity coverage ratio | % of stressed outflows | Banks, central banks | Basel framework |
NGFS climate scenarios · Network for Greening the Financial SystemIFRS S2 Climate-related Disclosures · ISSBTCFD recommendations · Financial Stability Board TCFDPrinciples for the effective management of climate-related financial risks · Basel Committee on Banking Supervision
09Stewardship
Who maintains the method.
Pêşketina aborî stewards econometrics for the Consortium and reviews how it is applied across platforms.
10Girêdayî
Ev rûpel li ser Konsorsiyûmê te ber bi kû ve dibe.
11Pirs
Pirs û bersiv.
What are the limits of econometrics in this field?
Endogeneity, measurement error and structural change can bias estimates. Relationships may shift under extreme conditions.
How are results checked?
Models are assessed through specification tests, robustness checks and out-of-sample performance. Results are compared across datasets and methods.
Are the values on this page real?
The data names, roles and checks are real descriptions of practice. The canvas shows a design of the method’s use, not a run; no result is reported here.
Where else is this method applied?
Çavdêrxaneya canonical method page lists every platform that applies it.
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Ji vê rûpelê delîl bidin.
rêzeya Pergalên Stratejîk is the Consortium’s quarterly publication. What you know about this subject can become evidence, a case or a correction in the next edition, credited to you and published under CC BY 4.0 where it is your own work.
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Bring an exposure or capital question to the Alliance.
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Hiqûqî
Belgeyên hiqûqî.
Nexşe, dane û jimarên vê malperê ji bo çarçoveyê û agahiyên giştî têne nîşandan. Ew ne şîret, ne pêşbînî û ne hişyarî ne; sînorên agahiyê di Daxuyaniyên Berpirsiyariyê û Daxuyaniyên Daneyê de hatine diyarkirin.