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The World Bank Economic Review Advance Access published online on November 1, 2008
The World Bank Economic Review, doi:10.1093/wber/lhn011
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© The Author 2008. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / THE WORLD BANK. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org

Quantitative Approaches to Fiscal Sustainability Analysis: A Case Study of Turkey since the Crisis of 2001

Nina Budina and Sweder van Wijnbergen

Correspondence: E-mail address is nbudina{at}worldbank.org

JEL codes: E61, E62, F34, C15

This case study of fiscal sustainability in Turkey after the crisis in 2001 reviews and extends quantitative approaches to fiscal sustainability analysis and brings them together in a user-friendly tool applicable in a data-sparse environment. It combines a dynamic simulations approach with a steady-state consistency approach. It also incorporates user-defined stress tests and stochastic simulations to deal with uncertainty. And it derives the future distribution of debt-output ratios, evaluating the fiscal adjustment required to stabilize them. Value at Risk analysis shows that considerable risks remain unless explicit feedback rules from debt surprises to the primary surplus are implemented.

Nina Budina is a senior economist in the Economic Policy and Debt Department at the World Bank; Sweder van Wijnbergen (corresponding author) is a professor of economics at the University of Amsterdam, the Netherlands; his e-mail address is svanwijnbergen{at}gmail.com. A technical appendix to this paper is available at http://go.worldbank.org/EJCL5YFGX0.


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