1、Fiscal Risks Paolo Mauro Fiscal Affairs Department International Monetary Fund Introduction Fiscal Risks: Deviations of fiscal outturns (deficits, debt/GDP) from expectations at the time of the budget or other fiscal forecasts. How large and frequent are the deviations for different groups of countr

2、ies? What are the most important types of shocks? Does this depend on degree of integration in global financial markets? (Will rely on work on the correlates of output drops.) What can policy makers do about fiscal risks? (Identify, Disclose, Manage). Statements of Fiscal Risks. Begin by looking at

3、Output Drops Definition of output drop Frequencies Catalog of shocks Unconditional and conditional frequencies, expected cost Bivariate, then multivariate (probit) approach Causality (timing)400050006000700080009000100005055606570758085909500Argentina GDP per capitaCurrency crisis andTerms of trade

4、shockTable 2. Output Drops: Frequency, Duration and Loss, 1970-2001Source: Authors calculations based on Maddison (2003) data.Notes: “All” output drops include concluded, ongoing and sub-events. Concluded drops are fully observed within the sample period whereas ongoing drops had not ended by 2001 a

5、nd the duration and loss for these drops are calculated assuming that the drops ended in 2002. Expected cost = = unconditional probability of a shock probability of output drop given the shock cost of the output drop when it occursFigure 2. Expected Cost of Shocks Based on Bivariate Estimates(in per

6、cent of pre-event GDP per capita) Figure 2b. Ex-ante Cost of Shocks Based on Multivariate Estimates that are Statistically Significant(in percent of pre-event GDP per capita) Output Drops and Shocks: Key Results 1900-2001 and four sub-periods: countries with lower initial p/c incomes have more outpu

7、t drops. 1970-2001: emerging markets have a drop every 16 years, duration 6 years, cumulative cost 40% of a years GDP; developing countries twice the costs Financial shocks matter more for emerging markets, real shocks for developing countries. For given output drop, decline in consumption is lower

8、in countries that are at high level of financial development than in countries of medium and low levels of financial development. Output Drops are All Unexpected: Forecast Error from October One Year Ahead 024681012-20-15-10-50Series: WEO_DACTOCTSample 1900 2001 IF EVENT_ALL25Observations 40Mean -5.

9、648995Median -4.819912Maximum 1.470343Minimum -19.32673Std. Dev. 4.640448Skewness -0.803957Kurtosis 3.562790Jarque-Bera 4.836862Probability 0.089061Now move to Fiscal Risks Fiscal Risks: Deviations of fiscal outturns (deficits, debt/GDP) from expectations at the time of the budget or other fiscal fo

10、recasts. Possible sources: macroeconomic shocks (exchange rate, cost of borrowing,.), contingent liabilities (guarantees, PPPs), legal claims against the government, bailouts of local governments, state-owned enterprises, banks, assumptions of debts. How large and frequent Preliminary empirical work

11、 on sources of risksAll Countries-Surprise Deviations in Debt/GDP10th Percentile020406080100120140Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd+4sd-5sd+5sd -30-20-100102030In percent of GDP; positive deviation if actual forecastTotal obs. 398; mean=-0.77; sd=6.78; skewness=0.21; kurtosis=6.96Deviations

12、of Debt/GDP-All Countries Surprise Deviations in Debt/GDP10th percentile01020304050607080Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd+4sd-5sd+5sd -30-20-100102030In percent of GDP; positive deviation if actual forecastTotal obs. 257; mean=-0.03; sd=5.73; skewness=0.19; kurtosis=5.60Advanced Countries 1

13、0th Percentile01020304050Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd+4sd -30-20-100102030In percent of GDP; positive deviation if actual forecastTotal obs.73; mean=-1.88; sd=8.62; skewness=0.80; kurtosis=7.52Emerging Countries10th Percentile051015202530Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd+4sd -30

14、-20-100102030In percent of GDP; positive deviation if actual forecastTotal obs. 68; mean=-2.38; sd=7.81; skewness=-0.02; kurtosis=5.44Developing Countries All Countries- Surprise Deviations in Balance/GDP10th Percentile04080120 160 200 240 280 320Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd+4sd-5sd+5sd

15、-6sd+6sd -20-15-10-505101520In percent of GDP; positive deviation if actual forecastTotal obs. 1397; mean=-0.36; sd=3.21; skewness=-0.47; kurtosis=8.96Deviations of Balance/GDP-All Countries Surprise Deviations in Balance/GDP10th Percentile0102030405060708090100Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-

16、4sd+4sd-5sd+5sd -10-50510In percent of GDP; positive deviation if actual forecastTotal obs. 378; mean=0.02; sd=2.20; skewness=-0.42; kurtosis=6.80Advanced Countries10th percentile020406080100120140Frequencymean-1sd1sd-2sd2sd-3sd3sd-4sd4sd-5sd5sd-6sd6sd -20-15-10-505101520In percent of GDP; positive

17、deviation if actual forecastTotal obs. 388; mean=-0.57; sd=3.52; skewness=-0.66; kurtosis=10.34Emerging Countries 10th Percentile020406080100120140160Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd+4sd-5sd+5sd -15-10-5051015In percent of GDP; positive deviation if actual forecastTotal obs. 631; mean=-0.45

18、; sd=3.49; skewness=-0.21; kurtosis=6.86Developing Countries Adverse Terms of Trade Shock(worsening of the terms of trade for goods by 10 percent or more)10th percentile01020304050Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd+4sd -20-15-10-5051015In percent of GDP; positive deviation if actual forecastT

19、otal obs. 128; mean=-1.15; sd=4.10; skewness=-0.92; kurtosis=6.85Deviations of Balance/GDP-All CountriesCurrency Crises(depreciation by at least 25 p.p. and at least 10 p.p. greater than the previous year)10th percentile051015Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd -10-50510In percent of GDP; positive

20、 deviation if actual forecastTotal obs. 46; mean=-2.22; sd=3.33; skewness=-0.91; kurtosis=3.12Deviations of Balance/GDP-All CountriesBanking Crises(outbreak years of crises as identified in the literature)10th percentile051015Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd+4sd -10-50510In percent of GDP;

21、positive deviation if actual forecastTotal obs. 35; mean=-1.05; sd=2.75; skewness=-0.31; kurtosis=2.97Deviations of Balance/GDP-All CountriesSudden Stops(worsening of financial balance by more than 5 p.p. of GDP)10th percentile010203040506070Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd -20-15-10-505101

22、5In percent of GDP; positive deviation if actual forecastTotal obs. 154; mean=-0.62; sd=4.85; skewness=-0.56; kurtosis=5.99Deviations of Balance/GDP-All Countries Oil Exporters: Years of Oil Price increase05101520Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-4sd4sd-30-20-10010203040In percent of GDP; positi

23、ve deviation if actual forecastTotal obs. 27; mean=-6.07; sd=10.23; skewness=-0.70; kurtosis=2.94Deviations of Debt/GDP-Fuel Exporters0369121518Frequencymean-1sd+1sd-2sd+2sd-3sd+3sd-15-10-505101520In percent of GDP; positive deviation if actual forecastTotal obs. 26; mean=3.16; sd=5.18; skewness=-0.41; ku