Standard DSA stress tests
Shocks to growth, interest rates, exchange rates and the primary balance are applied to debt projections, as in the IMF and World Bank frameworks.
GRA · Public Finance and Sovereign Debt
Spatial financeWhere capital meets hazard, exposure and transition
Scenario design and stress testing for public finance and sovereign debt
Scenario analysis and stress testing show how public debt and fiscal balances would evolve under adverse conditions. On this platform they explain the stress tests in debt sustainability frameworks, contingent liability shocks and climate scenarios for public finances.
01Qeyd
Scenario design and stress testing for public finance and sovereign debt on the record.
Method recordSTEM method
- RêbazSêwirandina senaryoyan û ceribandina bin zextê
- ParêzvanRêveberiya xetera pergalî
- Applied inDarayiya giştî û deynê serwerî
- Dane3 inputs
- Checks3 validation steps
- Canonical pageSTEM Commons
02Serlêdan
What scenario design and stress testing does here.
Scenario design and stress testing construct plausible, severe future conditions to examine how pergalan and institutions would perform. They complement probabilistic analysis where data are scarce or futures are deeply uncertain. In sovereign and public finance, development finance and disaster and crisis, stress tests reveal vulnerabilities that arise when several risks materialise together. They inform capital, contingency and coordination plans across sectors. The canonical description is on the STEM Commons.
Contingent liability shocks
Scenarios where guarantees are called or state enterprises need support are added to debt paths to show their potential effect.
Climate and disaster scenarios
Disaster shocks and transition paths are introduced into fiscal projections, with assumptions and uncertainty documented for users.
03Çavdêrî bike
Scenario stress.
The screen a team would use to follow this method: its measures, states and decisions. Names are examples and values are illustrative.
Scenario stress
Public finance and sovereign debt · Scenario design and stress testing · Run R-2370
Severe case breaches limitGRA · Public Finance and Sovereign Debt
Scenario set
| Xeta bingehîn | Central | 22 | Di nav de |
| Adverse | 1-in-25 | 49 | Girtin |
| Tund | 1-in-100 | 76 | Breach |
| Reverse stress | Find the break | 100 | Defines edge |
Method card
- Rêbaz
- Sêwirandina senaryoyan û ceribandina bin zextê
- Vegotin
- compound shock
- Horizon
- 3 years
- Nîşan
- MODELKIRÎ
Impact build-up, severe case
04Dane
What the method consumes.
Datasets and records used by scenario design and stress testing on this platform, with the role each plays and the label its values carry. Sources are listed in the source register.
| Dane | Rol | Nîşan |
|---|---|---|
| Baseline projections | Starting path | FORECAST |
| Historical shock sizes | Calibration | ÇAVDÊRÎKIRÎ |
| Contingent liability data | Shock inputs | 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 | 69.8 | 70.9 | 71.9 | 72.8 |
| 2 | 68.7 | 70.2 | 71.6 | 73.4 | 74.9 |
| 3 | 69.2 | 70.8 | 72.5 | 74.7 | 76.5 |
| 4 | 69.3 | 71.3 | 73.2 | 75.4 | 77.9 |
| 5 | 69.8 | 71.6 | 74.2 | 76.6 | 79.0 |
| 6 | 70.3 | 72.5 | 74.9 | 77.8 | 80.3 |
| 7 | 70.5 | 73.1 | 75.7 | 79.0 | 82.0 |
| 8 | 71.0 | 73.6 | 76.6 | 80.0 | 83.1 |
| 9 | 71.6 | 74.2 | 77.8 | 81.0 | 84.7 |
| 10 | 72.0 | 75.0 | 78.7 | 82.4 | 85.9 |
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.
Scenarios are reviewed for plausibility, internal consistency and severity relative to history. Exercise outcomes are compared with actual events when they occur.
| Kontrol bikin | How it is done |
|---|---|
| Severity calibration | Shocks are calibrated to historical experience |
| Combined shocks | Combined scenarios are run, not only single shocks |
| Conditional framing | Results are presented as conditional, not forecasts |
Scenario choice can reflect prevailing assumptions and miss novel combinations. Results depend on how participants and models represent responses.
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 scenario design and stress testing 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
08Connections
Topics that rely on this method.
09Stewardship
Who maintains the method.
Rêveberiya xetera pergalî stewards scenario design and stress testing 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 scenario design and stress testing in this field?
Scenario choice can reflect prevailing assumptions and miss novel combinations. Results depend on how participants and models represent responses.
How are results checked?
Scenarios are reviewed for plausibility, internal consistency and severity relative to history. Exercise outcomes are compared with actual events when they occur.
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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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
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