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Title:Fiscal sustainability in the presence of systemic banks: The case of EU countries PDF Logo
Authors:Bénassy-Quéré, Agnès
Roussellet, Guillaume
Issue Date:2012
Series/Report no.:CESifo Working Paper: Public Finance 3975
Abstract:We provide a first attempt to include off-balance sheet, implicit insurance to SIFIs into a consistent assessment of fiscal sustainability, for 27 countries of the European Union. We first calculate tax gaps à la Blanchard (1990) and Blanchard et al. (1990). We then introduce two alternative measures of implicit off-balance sheet liabilities related to the risk of a systemic bank crisis. The first one relies of microeconomic data at the bank level. The second one relies on econometric estimations of the probability and the cost of a systemic banking crisis, based on historical data. The former approach provides an upper evaluation of the fiscal cost of systemic banking crises, whereas the latter one provides a lower one. Hence we believe that the combined use of these two methodologies helps to gauge the range of fiscal risk.
Subjects:fiscal sustainability
tax gap
systemic banking risk
off-balance sheet liabilities
JEL:H12
H63
H81
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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