The Fiscal Costs of Contingent Liabilities: A New Dataset

By Elva Bova, Marta Ruiz-Arranz, Frederik G Toscani, H. Elif Ture

February 8, 2016

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Elva Bova, Marta Ruiz-Arranz, Frederik G Toscani, and H. Elif Ture The Fiscal Costs of Contingent Liabilities: A New Dataset, (USA: International Monetary Fund, 2016) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We construct the first comprehensive dataset of contingent liability realizations in advanced and emerging markets for the period 1990–2014. We find that contingent liability realizations are a major source of fiscal distress. The average fiscal cost of a contingent liability realization is 6 percent of GDP but costs can be as high as 40 percent for major financial sector bailouts. Contingent liability realizations are correlated among each other and tend to occur during periods of growth reversals and crises, accentuating pressure on the budget during already difficult times. Countries with stronger institutions are able to better control and address the underlying risks so that they are less exposed to contingent liability realizations.

Subject: Contingent liabilities, Economic sectors, Financial crises, Financial sector, Fiscal risks, Global financial crisis of 2008-2009, Public debt, Public financial management (PFM)

Keywords: Budget Deficits, CL, CL materialization, CL realization, CL shock, Contingent Liabilities, Debt assumption, Eastern Europe, Financial sector, Fiscal cost, Fiscal Crisis, Fiscal risks, Global, Global financial crisis of 2008-2009, Public Debt, SOE support, WP

Publication Details

Pages:

55
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/014
Stock No:

WPIEA2016014
ISBN:

9781498303606
ISSN:

1018-5941

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