Fiscal vulnerability to crises with perspective of consolidation: Cross-country analysis

Habib Ur-Rahman, Arthur Goldsmith, Gulasekaran Rajaguru, SafdarUllah Khan

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

This study investigates fiscal vulnerability to crisis with perspective of fiscal consolidation by utilising Threshold and Quantile regression methods. We conduct stability analysis (forward, backward and moving screening) along with public debt overhang and financial net worth approaches in Value at Risk (VaR) and Conditional Value at Risk (CVaR) using data from 1960 to 2014 for a range of 53 selected economies. We find results in favour of fiscal consolidation as a policy response to avoid fiscal vulnerability to crisis unlike widely believed 90 per cent benchmark of public debt to GDP ratio. Further results indicate lack of single benchmark of public debt to GDP across all selected countries. Interestingly different countries appear with different optimal values (ranging from 61 to 88 %) of public debt to GDP which may trigger vulnerability to crisis. This study contributes in the existing literature mainly in two ways i) introduces new dimension of fiscal consolidation as a policy response in relevance with fiscal crisis and ii) uses threshold and quantile regressions as the appropriate methods of estimation.
Original languageEnglish
Number of pages21
Publication statusPublished - 2016
Event45th Australian Conference of Economists - Adelaide, Australia
Duration: 11 Jul 201613 Jul 2016
Conference number: 45

Conference

Conference45th Australian Conference of Economists
Abbreviated titleAVE
CountryAustralia
CityAdelaide
Period11/07/1613/07/16

Fingerprint

Public debt
Cross-country analysis
Fiscal
Consolidation
Vulnerability
Fiscal consolidation
Benchmark
Threshold regression
Policy responses
Quantile regression
Net worth
Value at risk
Debt overhang
Screening
Stability analysis
Regression method
Trigger
Conditional value at risk

Cite this

Ur-Rahman, H., Goldsmith, A., Rajaguru, G., & Khan, S. (2016). Fiscal vulnerability to crises with perspective of consolidation: Cross-country analysis. Paper presented at 45th Australian Conference of Economists, Adelaide, Australia.
Ur-Rahman, Habib ; Goldsmith, Arthur ; Rajaguru, Gulasekaran ; Khan, SafdarUllah. / Fiscal vulnerability to crises with perspective of consolidation : Cross-country analysis. Paper presented at 45th Australian Conference of Economists, Adelaide, Australia.21 p.
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Ur-Rahman, H, Goldsmith, A, Rajaguru, G & Khan, S 2016, 'Fiscal vulnerability to crises with perspective of consolidation: Cross-country analysis' Paper presented at 45th Australian Conference of Economists, Adelaide, Australia, 11/07/16 - 13/07/16, .

Fiscal vulnerability to crises with perspective of consolidation : Cross-country analysis. / Ur-Rahman, Habib; Goldsmith, Arthur; Rajaguru, Gulasekaran; Khan, SafdarUllah.

2016. Paper presented at 45th Australian Conference of Economists, Adelaide, Australia.

Research output: Contribution to conferencePaperResearchpeer-review

TY - CONF

T1 - Fiscal vulnerability to crises with perspective of consolidation

T2 - Cross-country analysis

AU - Ur-Rahman, Habib

AU - Goldsmith, Arthur

AU - Rajaguru, Gulasekaran

AU - Khan, SafdarUllah

PY - 2016

Y1 - 2016

N2 - This study investigates fiscal vulnerability to crisis with perspective of fiscal consolidation by utilising Threshold and Quantile regression methods. We conduct stability analysis (forward, backward and moving screening) along with public debt overhang and financial net worth approaches in Value at Risk (VaR) and Conditional Value at Risk (CVaR) using data from 1960 to 2014 for a range of 53 selected economies. We find results in favour of fiscal consolidation as a policy response to avoid fiscal vulnerability to crisis unlike widely believed 90 per cent benchmark of public debt to GDP ratio. Further results indicate lack of single benchmark of public debt to GDP across all selected countries. Interestingly different countries appear with different optimal values (ranging from 61 to 88 %) of public debt to GDP which may trigger vulnerability to crisis. This study contributes in the existing literature mainly in two ways i) introduces new dimension of fiscal consolidation as a policy response in relevance with fiscal crisis and ii) uses threshold and quantile regressions as the appropriate methods of estimation.

AB - This study investigates fiscal vulnerability to crisis with perspective of fiscal consolidation by utilising Threshold and Quantile regression methods. We conduct stability analysis (forward, backward and moving screening) along with public debt overhang and financial net worth approaches in Value at Risk (VaR) and Conditional Value at Risk (CVaR) using data from 1960 to 2014 for a range of 53 selected economies. We find results in favour of fiscal consolidation as a policy response to avoid fiscal vulnerability to crisis unlike widely believed 90 per cent benchmark of public debt to GDP ratio. Further results indicate lack of single benchmark of public debt to GDP across all selected countries. Interestingly different countries appear with different optimal values (ranging from 61 to 88 %) of public debt to GDP which may trigger vulnerability to crisis. This study contributes in the existing literature mainly in two ways i) introduces new dimension of fiscal consolidation as a policy response in relevance with fiscal crisis and ii) uses threshold and quantile regressions as the appropriate methods of estimation.

M3 - Paper

ER -

Ur-Rahman H, Goldsmith A, Rajaguru G, Khan S. Fiscal vulnerability to crises with perspective of consolidation: Cross-country analysis. 2016. Paper presented at 45th Australian Conference of Economists, Adelaide, Australia.