A Framework to Assess Fiscal Vulnerability: Empirical Evidence for European Union Countries
Abstract
:1. Introduction
2. Related Literature
3. Describing the New Methodological Framework (V-L-D) to Assess Fiscal Vulnerability
Lit = 1, if CABit ≤ −4.7 percent of GDP, or (D–S)it = 1,
Lit = 0, if CABit > −4.7 percent of GDP, and (D–S)it = 0,
Vit = 3, indicating strong fiscal vulnerability, when Lit = 2 and Dit = 1, or Lit = 1 and Dit = 2
Vit = 2, indicating moderate fiscal vulnerability, when Lit = 1 and Dit = 1
Vit = 1, indicating low fiscal vulnerability, when Lit = 1 and Dit = 0, or Lit = 0 and Dit = 1
Vit = 0, indicating no fiscal vulnerability, when Lit = 0 and Dit = 0
4. The Usefulness and the Effectiveness of the New Methodological Framework (V-L-D)
4.1. Results and Further Extensions of the Proposed Methodology (V-L-D)
4.1.1. Fiscal Vulnerability Assessment Using V-L-D
4.1.2. Extensions of the V-L-D Methodology
Total Fiscal Vulnerability Score
Moderately vulnerable, if QTFVS1 < TFVSi ≤ QTFVS2,
Strongly vulnerable, if QTFVS2 < TFVSi ≤ QTFVS3,
The most vulnerable, if TFVSi > QTFVS3
The Weighted Average Fiscal Vulnerability
Moderately vulnerable, if QWAFV1 < WAFVi ≤ QWAFV2,
Strongly vulnerable, if QWAFV2 < WAFVi ≤ QWAFV3,
The most vulnerable, if WAFVi > QWAFV3
The Length of Fiscal Vulnerability Episodes
The 10-Year Fiscal Vulnerability Score
Moderately vulnerable, if FVS10 ∈ (Q1,Q2],
Strongly vulnerable, if FVS10 ∈ (Q2,Q3],
The most vulnerable, if FVS10 > Q3
4.2. The Effectiveness of the Proposed Methodology (V-L-D)
5. Concluding Remarks
Supplementary Materials
Author Contributions
Funding
Acknowledgments
Conflicts of Interest
References
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TRUE STATE | ||
---|---|---|
State | EDP Is Introduced (Fiscal Policy Is Vulnerable) | EDP Is Not Introduced (Fiscal Policy Is Not Vulnerable) |
V-L-D indicates fiscal vulnerability | A | B |
V-L-D indicates no fiscal vulnerability | C | D |
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Stoian, A.; Obreja Brașoveanu, L.; Brașoveanu, I.V.; Dumitrescu, B. A Framework to Assess Fiscal Vulnerability: Empirical Evidence for European Union Countries. Sustainability 2018, 10, 2482. https://doi.org/10.3390/su10072482
Stoian A, Obreja Brașoveanu L, Brașoveanu IV, Dumitrescu B. A Framework to Assess Fiscal Vulnerability: Empirical Evidence for European Union Countries. Sustainability. 2018; 10(7):2482. https://doi.org/10.3390/su10072482
Chicago/Turabian StyleStoian, Andreea, Laura Obreja Brașoveanu, Iulian Viorel Brașoveanu, and Bogdan Dumitrescu. 2018. "A Framework to Assess Fiscal Vulnerability: Empirical Evidence for European Union Countries" Sustainability 10, no. 7: 2482. https://doi.org/10.3390/su10072482