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A Simple Fiscal Stress Testing Model: Case Studies of Austrian, Czech and German Economies

Author

Listed:
  • Ondra Kamenik

    (OGResearch)

  • Zdenek Tuma

    (OGResearch)

  • David Vavra

    (OGResearch)

  • Zuzana Smidova

    (OECD)

Abstract

This paper develops a simple model-based framework for stress testing fiscal consolidation strategies under different scenarios of future shocks. A baseline scenario assuming a gradual debt consolidation is presented and by assuming different future developments (e.g. lower potential growth) and/or model specification in terms of a fiscal rule confidence bands around the baseline are obtained. Trade-offs between costs and benefits are evaluated, in terms of cumulative output loss and primary surpluses, as well as political difficulty of fiscal strategies and risk of failed consolidation. The model is applied to Austria, Czech Republic and Germany. This working paper relates to the 2013 OECD Economic Surveys of Austria, Czech Republic and Germany. (www.oecd.org/eco/surveys) Un modèle de simulation simple de crise budgétaire - études de cas des économies autrichienne, allemande et tchèque Ce document de travail présente un modèle simple permettant de tester des stratégies de consolidation budgétaire face à différents scénarios de chocs futurs. Le scénario de référence suppose une consolidation progressive de la dette et présente différentes évolutions futures (exemple : potentiel de croissance inférieur) et /ou une spécification du modèle sous la forme de bandes de confiance des règles budgétaires autour du scénario de référence. Ce document évalue les compromis entre les coûts et les avantages en termes de perte cumulative de production et d’excédents primaires ainsi que la difficulté d’application des stratégies budgétaires d’un point de vue politique et le risque d’échec de la consolidation budgétaire. Le modèle est appliqué à l’Autriche, la République tchèque et l’Allemagne. Ce document de travail a trait aux Etudes Economiques de l’OCDE de l’Autriche, de la République tchèque et de l’Allemagne, 2013.(www.oecd.org/eco/etudes)

Suggested Citation

  • Ondra Kamenik & Zdenek Tuma & David Vavra & Zuzana Smidova, 2013. "A Simple Fiscal Stress Testing Model: Case Studies of Austrian, Czech and German Economies," OECD Economics Department Working Papers 1074, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1074-en
    DOI: 10.1787/5k43nxm8hfvf-en
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    References listed on IDEAS

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    Cited by:

    1. Shalva Mkhatrishvili & Zviad Zedginidze, 2015. "Modeling Macro-Fiscal Interlinkages: Case of Georgia," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 7(1), pages 15-41, March.
    2. Ludovit Odor, 2016. "What should we include in the Fiscal Space Review?," Discussion Papers Discussion Paper No. 5/20, Council for Budget Responsibility.
    3. Jean-Marc Fournier & Philipp Lieberknecht, 2020. "A Model-based Fiscal Taylor Rule and a Toolkit to Assess the Fiscal Stance," IMF Working Papers 2020/033, International Monetary Fund.

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    More about this item

    Keywords

    Central Europe; consolidation de la dette; debt consolidation; déficit structurel; Europe centrale; fiscal policy; politique budgétaire; structural deficit;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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