This paper shows that managing the risk of a budget deficit has (at least) two elements, the level of fiscal prudence, and the scope for discretionary measures (e.g., scope for reducing program spending). These two elements jointly determine the probability of a deficit outcome. The magnitude of...

Firstly, the study illustrates in a stochastic simulation model that permanent commitments to tax and spending measures can be enriched significantly without substantially raising the risk of a deficit outcome. This result is obtained in a framework where the fiscal authority is able to monitor...

This paper examines the capacity of a variety of macroeconomic indicators to forecast a one-quarter decline in U.S. real GDP in a given quarter using a standard probit model. We find the U.S Conference Board index of coincident indicators of U.S. economic activity to be the best single...

This paper presents an indicator, or non-structural model of inflation in Canada that provides forecasts up to four quarters ahead. Our indicator model is not based on a tight theoretical foundation, but it incorporates most of the factors that are thought to cause inflation. The model also...

The goal of this paper is to compare the long-term fiscal outlook in Canada and the United States using a simple measure of the sustainability of federal fiscal policy. The paper begins by explaining that standard Canada-US fiscal comparisons can be misleading because they do not take account of...

Many institutions issue debt in both short-term markets, which implies frequent rebalancing, and long-term bond markets, which typically pay a higher coupon. The liability manager must consider this risk/cost trade-off in the face of uncertain interest rates and funding requirements. The debt...