Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/81591 
Year of Publication: 
2009
Series/Report no.: 
Discussion Paper No. 2009/3
Publisher: 
Turkish Economic Association, Ankara
Abstract: 
This study aims to assess the gross domestic debt sustainability of Turkey through construction of a risk index suitable for short-term policy making. Construction of the risk index follows a methodology similar to the Garcia and Rigobon’s Risk Management Approach (2004). However, unlike most fiscal sustainability studies carried out for Turkey, our index is based on a finite time horizon approach and emphasizes the importance of having a forward-looking measure of fiscal dynamics rather than a test based on past behavior. Within this framework, the main contribution of this paper is to introduce the uncertainty and finite horizon approach into the analysis of the fiscal sustainability of Turkey. A vector-autoregression (VAR) model is used primarily to estimate the joint dynamics of the related macro-variables for the 1990:1-2007:9 periods. Then, the simulated fiscal variables are used to construct the risk index. This index is based on a comparison of a target level of the debt ratio with a simulated debt ratio. Results indicate that the fiscal stance of Turkey has a sustainable outlook through the end of 2007:9.
Subjects: 
Turkey
Fiscal Sustainability
Monte Carlo Simulation
Vector Auto-Regression
Document Type: 
Working Paper

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