A Simple Fiscal Stress Testing Model: Case Studies of Austrian, Czech and German Economies

This paper develops a simple model-based framework for stress testing fiscal consolidation strategies under different scenarios of future shocks. A baseline scenario assuming a gradual debt consolidation is presented and by assuming different future developments (e.g. lower potential growth) and/or model specification in terms of a fiscal rule confidence bands around the baseline are obtained. Trade-offs between costs and benefits are evaluated, in terms of cumulative output loss and primary surpluses, as well as political difficulty of fiscal strategies and risk of failed consolidation. The model is applied to Austria, Czech Republic and Germany. This working paper relates to the 2013 OECD Economic Surveys of Austria, Czech Republic and Germany. (www.oecd.org/eco/surveys) Un modele de simulation simple de crise budgetaire - etudes de cas des economies autrichienne, allemande et tcheque Ce document de travail presente un modele simple permettant de tester des strategies de consolidation budgetaire face a differents scenarios de chocs futurs. Le scenario de reference suppose une consolidation progressive de la dette et presente differentes evolutions futures (exemple : potentiel de croissance inferieur) et /ou une specification du modele sous la forme de bandes de confiance des regles budgetaires autour du scenario de reference. Ce document evalue les compromis entre les couts et les avantages en termes de perte cumulative de production et d’excedents primaires ainsi que la difficulte d’application des strategies budgetaires d’un point de vue politique et le risque d’echec de la consolidation budgetaire. Le modele est applique a l’Autriche, la Republique tcheque et l’Allemagne. Ce document de travail a trait aux Etudes Economiques de l’OCDE de l’Autriche, de la Republique tcheque et de l’Allemagne, 2013.(www.oecd.org/eco/etudes)