Abstract
Abstract The present paper applies recently developed consolidated indicator of the state financial security to the situation in Baltic States and some EU countries. The indicator summarises a number of economic and financial parameters relevant to the financial independence of the country. The resulting indicator demonstrates a reasonable correlation with sovereign Fitch rating both for Baltic States and the “old” EU countries, but Fitch rating gives more optimistic evaluation for old EU countries.
Highlights
A problem of the state financial system instability becomes the issue of primary concern due to the recent world financial crisis, demonstrating an urgent need for the instruments to evaluate the state financial stability in the aspect of the government debt policy and management
One can conclude that the result of evaluation of the financial stability using the proposed consolidated indicator does not depend much on the relative importance of the contributing parameters
The present paper has explored application of the consolidated indicator, based on the eight economic and financial parameters, for the evaluation of the state financial stability of the selected EU countries
Summary
A problem of the state financial system instability becomes the issue of primary concern due to the recent world financial crisis, demonstrating an urgent need for the instruments to evaluate the state financial stability in the aspect of the government debt policy and management. Ketners et al proposed use of inflation rate, government payment balance, government debt to GDP ratio and money stock to GDP ratio (Ketners, Krastiņš, & Zvidriņa, 2007). Still, this approach ignores several important indicators, such as the share of external debt. The author has recently developed the consolidated indicator for the evaluation of the state financial stability. Results have demonstrated good correlation between the developed indicator and evaluations made by the leading international credit rating agencies The question whether this correlation remains in force for other countries still persists. Some of the “old” European Union countries were considered as well
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