Fiscal Vulnerability Research Articles

Measuring fiscal stress via fiscal vulnerability index: a case of Turkish economy

PurposeThis paper aims to develop a compound measure, which is fiscal vulnerability index, provides early warning signals of fiscal sustainability problems for Türkiye's economy.Design/methodology/approachThe index is constructed using twelve distinct fiscal indicators and applying the portfolio method, which considers the time-varying cross-correlation structure between the subindices.FindingsDynamics of the fiscal vulnerability index indicate that it accurately predicts to the well-known fiscal crisis occurring in Türkiye's recent history. As a result, such a compound measure should be used in the early identification of fiscal vulnerability in Türkiye.Originality/valueThe main contribution of this paper, relative to existing papers, is that a fiscal vulnerability index was constructed by employing the most contemporaneous method and evaluating its performance in terms of capturing historical stress periods.

Does economic complexity reduce the probability of a fiscal crisis?

Fiscal crises are costly but are not rare. It is crucial to prioritize preventing such crises. While several studies have explored the impact of macroeconomic variables and international factors on fiscal outcomes, little attention has been given to the role of a country’s productive structure sophistication. Does a country’s ability to export diversified and less ubiquitous goods significantly reduce the likelihood of a fiscal crisis? To answer this question, we use hazard duration analysis and a comprehensive dataset of 172 countries (spanning over 200 fiscal crisis episodes) between 1995 and 2020. We show that economic complexity has a significant impact on a country’s likelihood of experiencing a fiscal crisis. A one-point increase in the Economic Complexity Index reduces the probability of a fiscal crisis by half. This effect is robust across low-income, emerging, and advanced economies. Institutional factors also play an essential role in reducing the risk of a fiscal crisis, whereas variables such as debt-to-output ratio, real rate of growth, inflation, terms of trade, and fiscal balance have little to no impact. Our results indicate that a country’s development strategy should prioritize increasing economic complexity to reduce fiscal vulnerability. By reducing the risk of fiscal crises, economic complexity contributes to macroeconomic stability, which is a fundamental condition for economic development.

Fiscal Sustainability and Risks of Provincial Government After Pandemic

The Covid-19 pandemic that has hit the world since the year 2019 puts fiscal pressure on the Governments of Indonesia. The Government of Indonesia has spent very big expenses to deal with the pandemic and recovery the national economic conditions. This condition will increase a fiscal risk level to achieve Gold Indonesia Vision of the year 2045. This article aims to assess the impacts of Covid-19 pandemic to fiscal sustainability of the central and provincial governments in Indonesia and identify the risks faced by the central and provicial governments after this outbreak. By using quantitative descriptive analysis and focus group discussion, it was identified an increase in the level of fiscal vulnerability in the central and provincial governments in Indonesia. The results of an analysis for the provincial government level conclude that provincial governments throughout Indonesia are under pressure on their fiscal sustainability. This is reflected in the decline in the Tax ratio, the increase in Debt to Income, and the increase in the budget deficit. This encourages the emergence of new risks that can interfere with efforts to achieve development goals. Several fiscal policies need to be taken to maintain fiscal sustainability like intensification and extensification of taxes and improving the quality of regional spending.

Integrated Care Education for General Psychiatry Residents in the US: a Review of the Literature.

The purpose of this review was to synthesize published literature describing integrated care education available to general psychiatry residents in the United States (US) in order to better understand curricular models and summarize curriculum barriers and facilitators. The authors searched electronic databases for articles describing integrated care education for general psychiatry residents. Minimum inclusion criteria were focus on an ambulatory integrated care curriculum, description of the study population and training program, publication in English, and program location in the US. Data extracted included trainee, faculty, or collaborator evaluations, educational model, level of care integration, and barriers or facilitators to implementation. The literature search identified 18 articles describing curricula at 26 residency programs for inclusion. Most programs offered clinical and didactic curricula to advanced trainees across a variety of care integration levels. Common barriers included fiscal vulnerability and difficulties identifying team members or clarifying team member roles. Common facilitators included institutional and interdepartmental support, dedicated space, and faculty supervision. No statistical analysis was able to be performed due to study heterogeneity. This review found a relatively small number of articles written about integrated care education for psychiatry residents. Resident evaluation suggests this training is valuable regardless of curriculum structure, training years, or level of care integration. Dedicated funding, staff, and space were crucial for successful curricula. This review highlights a need for more rigorous research characterizing and evaluating integrated care education.

Levine Cancer Institute Financial Toxicity Control Program: Expanding the program to reduce fiscal vulnerability of patients.

43 Background: It is well known that financial toxicity is becoming one of the most substantial problems encountered by patients receiving cancer care, and active solutions are required to address this (JCO Oncol. Pract., 2021, 17: e 1433-39). We have established a Financial Toxicity Tumor Board to address specific issues that cause out-of-pocket costs for patients and have saved more than $55 million per year in such costs to patients. A major contributor to patient-centric costs is denials from health insurance companies. We have developed an innovative, pharmacy technician program to assess and understand such denials and to avoid them proactively. Methods: Pharmacy technicians were inserted into an additional site’s treatment team to ensure appropriate prior authorizations were in place prior to patient infusion. Sequential and unselected data were collected over by the prior authorization technician. Medication denial reports generated by the financial clearance team were analyzed to identify issues that might be improved by changes in standard operating procedures in order to avoid recurrent concerns and these solutions were implemented. Results: The approach adopted by the LCI Financial Toxicity Tumor Board, with the use of additional pharmacy technicians to manage and preplan documentation, has resulted in a reduction of denials over a one-year period of from 16-18/month to 3-4/month with a concomitant additional saving to patients of $5,720,753. The expansion to an additional site over the evaluation period has preliminarily resulted in a 48% decrease in financial toxicity for patients as compared to the previous year. Conclusions: A reality of clinical practice is an ever-present fiscal tension between payers, patients and providers, with payers adopting increasingly complex rules and regulations to avoid payment of charges. When this occurs, patients inevitably sustain increased out-of-pocket charges and anxiety, contributing to the pattern of financial toxicity. The approach of using technical support staff to prospectively avoid insurance denials can be scaled universally to ensure that health insurance payers, while adhering to their defined rules and regulations, are held accountable for their contractual obligations.

Assessing public debt sustainability under COVID-19 uncertainty: Evidence from Côte d'Ivoire.

This article investigates public debt sustainability, in the context of a novel exogenous shock, by proposing a realistic forecasting procedure. The procedure implies the combination of a Bayesian VAR model and a nonlinear fiscal reaction model to derive a large number of simulated public debt paths and construct a probabilistic debt sustainability indicator. Annual data covering the period from 1970 to 2019 are used in the African context, with Côte d'Ivoire as a case study. Forecasts suggest low probabilities of non‐increasing trend and well‐contained upside risks (16%–27%) in Côte d'Ivoire for the forecasting period 2021–2024, regardless of the scenario underlying the evolution of COVID‐19 and suggesting that the country remains vulnerable to debt distress risks. Government should promote a sound and reliable debt management system to mitigate such risks. Results also highlight the importance of domestic resources mobilization in reducing the country's fiscal vulnerability and building a sustainable post‐COVID recovery.

An analysis of the linkages among fiscal vulnerability, financial stress and macroeconomic policies: an econometric study

PurposeThis study aims to analyze the imbalances in the public finance structure of Pakistan’s economy and highlight the need for comprehensive reforms. Specifically, it aims to contribute to the empirical literature by analyzing the relationship between fiscal vulnerability, financial stress and macroeconomic policies in Pakistan’s economy between 1971 and 2020.Design/methodology/approachThe study develops an index of fiscal vulnerability, an index of financial stress and an index of macroeconomic policies. The fiscal vulnerability index is based on the patterns of fiscal indicators resulting from past trends of the selected variables in Pakistan’s economy. The financial stress in Pakistan is caused from the financial disorders that are acknowledged in the composite index, which is based on variables with the potential to indicate periods of stress stemming from the foreign exchange market, the securities market and the monetary policy components. The macroeconomic policies index is developed to analyze the mechanism through which fiscal vulnerability and financial stress have influenced macroeconomic policies in Pakistan. The causal association between fiscal vulnerability, financial stress and macroeconomic policies is analyzed using the auto-regressive distributive lags approach.FindingsThere exists a long-run relationship between the three indices, and a bi-directional causality between fiscal vulnerability and macroeconomic policies.Originality/valueThis study contributes to the development of a fiscal monitoring mechanism, which has the basic purpose of analyzing the refinancing risk of public liabilities. Moreover, it focuses on fiscal vulnerability from a macroeconomic perspective. The study tries to develop a framework to assess fiscal vulnerability in light of “The Risk Octagon” theory, which focuses on three risk components: fiscal variables, macroeconomic-disruption-associated shocks and non-fiscal country-specific variables. The initial contribution of this work to the literature is to develop a framework (a fiscal vulnerability index, financial stress index and macroeconomic policies index) for effective and result-oriented macro-fiscal surveillance. Moreover, empirical literature emphasized and advised developing countries to develop their own capacity mechanisms to assess their fiscal vulnerability in light of the IMF guidelines regarding vulnerability assessments. This study thus attempts to fulfill the said gap identified in literature.

A Fiscal Vulnerability Indicator for Lesotho

The objective of this paper is to construct a fiscal vulnerability indicator for Lesotho using annual fiscal and macroeconomic data from 1993 to 2017 and a Dynamic Debt Equation for calculating Fiscal Vulnerability (DDE-FV) that estimates a debt stabilising primary balance. A normal fiscal vulnerability range of 2 to 4 percent of GDP and a severe fiscal vulnerability range of 8 to 10 percent of GDP were identified. Results show few periods of severe fiscal vulnerability compared to normal fiscal vulnerability episodes from 1993 to 2017. The severe fiscal vulnerability was observed in two out of the 25 years. The normal fiscal vulnerability was observed for 11 out of the 25 periods. Lesotho’s fiscal policy was above the normal fiscal vulnerability threshold between 1992 and 2001 before returning to levels largely within the tolerable fiscal vulnerability level for the remainder of the 1993-2017 period.

The Twin Deficit Hypothesis in the MENA Region: Do Geopolitics Matter?

This paper examines the relationship between fiscal and external balances in MENA oil versus non-oil countries in the context of the twin deficits hypothesis (TDH) using Panel Vector Autoregression- Generalized Methods of Moments PVAR GMM estimation, Granger Causality and IRFs. The essence of this analysis is to assess the vulnerability of fiscal and external balances to oil price dynamics and regional geopolitics in the region. Results show that a twin-deficit problem exists in MENA oil-rich countries only while the problem does not exist in non-oil ones. This affirms the hypothesis that oil dependence results in high fiscal vulnerability to geopolitical shocks that automatically transmits to external balances. While a TDH isn’t proven to exist in non-oil countries, fiscal and external balances problems result from longstanding structural factors. A high reliance on tourism revenues and remittances as main sources of foreign currency receipts (together with poor tax administration and enlarged current spending bills) makes those countries more vulnerable to domestic and external shocks; reflected in both growing fiscal and current account deficits. A large imports sector and relatively poor exporting capacity also contribute to weakening external accounts. The main policy recommendations for MENA oil-rich countries rely in the importance of strengthening the non-oil sector in order to diversify domestic sources of revenues. Adopting flexible exchange rates is recommended to decrease the vulnerability of the external shocks to oil price dynamics. For non-oil MENA regions, fiscal consolidation, reforming current spending and strengthening tax administrations are crucial to improve fiscal performance. Export-led growth strategies and inclusive growth policies would also contribute to improving external accounts in the examined economies.

Analysis of Australia’s Fiscal Vulnerability to Crisis

Fiscal vulnerability, like a contagion, poses a threat to financial sector stability, which can lead towards sovereign default. This study aimed to assess fiscal vulnerability to crisis by investigating the Australian economy’s gross public debt, net public debt, and net financial liabilities. We used a threshold regression model and compared results with the baseline deficit–debt framework of analysis. The results of the base model suggested that the economy is fiscally sustainable, and that the primary surplus remains unaffected by increasing levels of public debt. In contrast, the threshold regression model indicated that the increasing level of debt has eroded primary surplus below the threshold level of 30.89% of public debt to GDP. These results need further investigation. Therefore, we modified our basic threshold model to capture budget deficit and surplus as a threshold in response to changes in public debt. The results from the sequential threshold regression model using the debt to GDP ratio and primary budget surplus identifying the periods of 1991, 1992, 2008, 2009, 2011 and 2019 as times of likely vulnerability to fiscal crisis. The overall results confirmed that the primary surplus remained sustainable over the estimated threshold level of public debt in all other sample periods and these findings persisted across alternative measures of public debt.

Rising External Debt Burden, Increase Financial Stability Risk; the Need for Fiscal Adjustment in Nigeria

The study examines the rising external debt burden, increased financial stability risk; the need for fiscal adjustment. Given that economic sustainability is the prime desire of every economy and considering the continuous accumulation of external borrowings. Our main focus is to investigate the fiscal vulnerability and debt sustainability position of the Nigerian economy. To find out whether the country’s present fiscal position is sustainable? Has the substantial external borrowings in the last two decades of uninterrupted democratic rule significantly supported the growth path of the Nigeria economy? If not, there is need for fiscal adjustment. Our period of investigation spans from 1999 to 2019. Data estimated using the time series based from CBN, Federal Ministry of Finance, IMF/World Bank publications. In analyzing the country’s debt burden/vulnerability, we applied the IMF debt burden indicators under the debt sustainability framework (DSF) for low income countries. Using the descriptive statistic, the study also employed the regression analysis technique to exploits the cause and effect relationship between the nation’s present debt stock, debt servicing obligation and the nominal as well the real economic growth rate. Our findings revealed the following; (i) using the percentile analysis and comparing it with the major debt sustainability bench marks under the IMF/Work Bank specifications, the country’s debt sustainability position was very negligible. The Nigerian situation shows debt sustainability position that fell below the bench marks (ii) the results of our finding also indicates a negative statistically significant relationship that exists between debt stock, servicing payment and both the nominal and real GDP. Based on our results, we concluded that the present fiscal vulnerability position of the country if not checked or curtailed through fiscal adjustment would amount to increasing the financial stability risk capable of causing deterioration in the functioning of the economy. We therefore, suggest amongst other measures that all should be aimed at improving and or enhancing monetary restrains, debt contraction restrains as well evolving and improving existing rules toward achieving fiscal responsibility and discipline.

How vulnerable is the fiscal posture in Turkey?

<abstract> <p>This study gauges the degree of fiscal vulnerability in Turkey by calculating the debt stabilising primary balance level and evaluates how this variable measures up against the actual primary balance levels for the 1978–2019 period. Based on this comparison, we build up a fiscal fragility index using the methodology described in <xref ref-type="bibr" rid="b15">Stoian (2012)</xref>. In addition, the Toda-Yamamoto causality test is carried out to detect the direction of causality among these two variables. The index-based analysis reveals that the fiscal performance of Turkey was chiefly satisfactory for the estimation period. Also, the Toda-Yamamoto causality test results imply a unidirectional causality from the required primary balance to real primary balance, suggesting that the government uses the primary balance to stabilise fiscal imbalances, which is an affirmative effort by the government to restore fiscal sustainability. Nevertheless, notwithstanding the implementation of corrective fiscal actions to preserve stability, the index value is steadily moving up in recent years, indicating a mounting fiscal vulnerability risk. Back-loading fiscal adjustments involving spending cuts, full-fledged tax reform, proper scrutiny of public expenses, etc., are among the prominent policy options available to the government to alter the ongoing unfavourable trend in the fiscal vulnerability index.</p> </abstract>

Measuring Fiscal Vulnerability and Fiscal Stress via Fiscal Fragility Index

Measuring Fiscal Vulnerability and Fiscal Stress via Fiscal Fragility Index

Surging seas, rising fiscal stress: Exploring municipal fiscal vulnerability to climate change

Recent disasters and growing concerns about climate change have spurred calls for cities to retreat from and avoid developing in coastal areas. Instead, cities have doubled down on waterfront development. We ask why and with what implications, using the U.S. state of Massachusetts as a case study. By overlaying data on sea level rise, land use, and property taxes, we find a few coastal cities may lose significant levels of municipal revenues to long-term sea level rise, while others face negligible impacts. Coastal municipalities are cognizant of their risks yet continue to site redevelopment projects in flood-vulnerable areas to meet present-day budgetary needs. Moreover, they resist efforts to align property values and insurance premiums with climate risks, as reforms only hasten lost taxes. Left unchanged, existing land use and fiscal policies incentivize municipalities to make short-term decisions with accelerating climate risks over time. This creates new dynamics of fiscal stress that can increase regional inequality and vulnerability to climate change. The study highlights the need for dialogue among researchers and policymakers in the U.S. and internationally on the nexus between land use planning, government administration, and climate change as these tensions likely exist wherever local governments rely on land-based finance.

Testing Minsky’s Financial Fragility Hypothesis for Turkey’s Public Finances

This paper gauges the degree of fiscal vulnerability in Turkey from a Minskian perspective. Succinctly speaking, Minsky’s financial stability hypothesis states that the government should apply hedge financing at least sporadically and pursue countercyclical fiscal policies to restore stability. We calculated two fiscal fragility indices based on Minsky’s hypothesis to examine the recent trends in Turkish public finances. According to our findings, Turkish fiscal balances are in a deteriorating trend and heading towards (ultra)Ponzi financing which is evidenced by the plummeting values of the fiscal fragility index. The results are suggestive that currently the fiscal performance in Turkey is waning gradually and current fiscal posture is not on a par with past years. Worsening fiscal balances emit a signal for a looming fiscal crisis and it is evident that this trend should promptly be reversed by the aid of appropriate expedients. Quitting the use of procyclical fiscal policies, building up public confidence by primary balance generation, implementing full-fledged tax reform, restructuring contingent liabilities, proper scrutiny of expenditures, reducing profligacy are among the policy options available for the government. Notwithstanding the abundance of alternative fiscal policies, the current Covid-19 pandemic is quite a hindrance to attaining intended outcomes regarding fiscal stability.

A TEST OF THE FISCAL THEORY OF PRICE LEVEL: CASE STUDY OF NIGERIA

The Paper tests the efficacy of fiscal theory of price level in Nigeria using an Auto Regressive Distributive lag (ARDL) model for the period from 2002Q1 to 2017Q4. The study seeks to test the hypothesis that of Leeper (1991) and Sim (1998) that the price level is not independently determined by the monetary authorities, rather it is as a result of the relationship between monetary and fiscal authorities. The Nigerian Federal Government has had to resort to continuous borrowing in order to meet its financial obligations. The size of the fiscal deficit has ballooned which if not controlled could worsen fiscal vulnerability and eventually lead to financial distress. We find that fiscal deficits have a positive and statistically significant effect on inflation in all models estimated, attributed to the high degree of fiscal dominance in Nigeria. Giving our findings, Nigerian economy needs to address the challenge of high fiscal imbalances.

Monetary Policy Transmission in the Euro Zone

This paper focuses on monetary policy transmission through the bank lending channel in the euro zone. We analyze the relationship between output, inflation, short-term and longterm interest rates, and bank loans. In addition, based on recent concerns of rising deficits and debt we include three variables that capture fiscal vulnerability. Using quarterly data from 2002 to 2016 for the original twelve members of the euro zone (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain) we estimate a panel vector autoregression and examine impulse responses and variance decompositions. Our results show that tight monetary policy leads to an expected decline in output, but surprisingly, raises prices. We also find that the high deficits and debt burdens affect monetary policy transmission for the euro zone-12 countries. Overall, our results suggest that the euro zone is at best, only partially functioning as a cohesive unitKeywords: Budgetary Policy, Capital Taxation Rate, Consumption Taxation Rate, DSGE Model, Labor Taxation Rate, Wages Rigidity

A Framework to Assess Fiscal Vulnerability: Empirical Evidence for European Union Countries

Following the financial crisis of 2007 and the sovereign debt crisis in 2010 that affected the soundness and reduced the strength of public finance in European countries, there has been a growing interest in developing methodologies to the help assess and signal the vulnerability of fiscal policy. Therefore, the aim of this study is to develop a new framework (V-L-D) to assess fiscal vulnerability. V-L-D represents a new methodology on the measurement of fiscal vulnerability that relies on the assumption that vulnerability can occur even during calm times. In comparison with previous methodologies that studied fiscal vulnerability around crisis and fiscal distress times, our framework investigates fiscal vulnerability near fiscal adjustments episodes. Our methodology relies on two distinct indicators: one showing the vulnerabilities indicated by the level of the cyclically adjusted budget balance and distance-to-stability, and one showing the vulnerabilities pointed out through the changes of the cyclically adjusted budget balance and public debt. V-L-D is able to classify fiscal vulnerability into five distinct categories having scores from 0 (no fiscal vulnerability) to 4 (extreme fiscal vulnerability). Using annual data ranging over 1990–2013 for 28 European Union countries, we evidenced 310 episodes of fiscal vulnerability, out of which 128 episodes of low vulnerability, 94 of moderate, 62 of strong, and 26 of extreme fiscal vulnerability. We also found that over 2004–2013, Greece, Portugal, Romania, United Kingdom, Ireland, Spain, and Slovenia were the most fiscally vulnerable countries in the Union. United Kingdom and Greece went through the longest episodes of fiscal vulnerability, counting 12 and 11 consecutive years, respectively. We tested our framework’s effectiveness against the Excessive Deficit Procedure. We found that the overall performance is good: V-L-D assessed moderate fiscal vulnerability during the procedure, strong fiscal vulnerability in the first year when procedure was initiated, and extreme vulnerability one year before the initiation.

THE LANDSLIDE HAZARD MAP OF BOGOTA AN UPDATING

Abstract. A land management plan (Plan de Ordenamiento Territorial, POT) is an instrument for planning the land-use of a territory considering physical, social and economic aspects. In the frame of the POT’s upgrading, the risk management plays an important role in conservation of human lives, prioritization of territory’s land-use as well as the formulation to reduce the fiscal vulnerability of the territorial institutions when a disaster occurs e.g. landslides. Landslides represent a rampant danger in Bogota’s hillside area because of accelerated urban growth, steep topography, degraded rocks, susceptible soils and abundant rain among other factors. It is calculated that more than 3 500 000 people live in such risky zones. This paper presents the methodology followed to update the landslide hazard map – from the GIS techniques perspective – produced by an interdisciplinary team formed by geologists, geotechnical and GIS specialists. The methodology used to obtain the map of landslide hazards consists of the combination of two partial results regarding to the evaluation and analysis of slopes’ stability in the studied area. The first one has to with a heuristic method that combines the variables prone to influence the occurrence of landslides. The following eight variables were included: relief, drainage, and material, land use as susceptibility factors and erosion, climate, earthquake, human factor as triggering factors. To combine these variable map algebra was used. While the second partial result involves stability of natural slopes. Despite the fact that in Latin-American region and especially in public institutions proprietary software is widely used, the visualisation and edition of geographic information was performed with QGIS software. Additionally, the study area covered a considerable part of Bogota’s urban region which demanded a quite efficient and robust software that allow to execute a straightforward and complex processing. GRASS GIS software was used to carry out most of the geoprocessing tasks without splitting up the datasets. The Open Source GRASS yielded excellent results proving be an efficient tool when dealing with big datasets. Furthermore, in the study of some variables very specific geomorphology algorithms, such as Terrain Classification from SAGA GIS, were used. Meanwhile automation of some geoprocesses was implemented with proprietary software. New techniques and procedures as well as detailed inputs with further level of detail provided a more accurate map in a shorter period of time. One of this techniques is the delimitation of areas for evaluating the stability of natural earth slopes which was analysed with the support of hydrological modelling in GIS. This helped to guarantee the homogeneity of these regions, yielding quite acceptable results when accuracy is proved as an important condition in the application of this method. This map constitutes a valuable input in the risk management when dealing with land planning of the city. From this new hazard map, new suitable areas for housing can be defined. Also, it is the initial input for determining the necessity of new civil works for disaster mitigation. In some cases, resettlement of affected people will be recommended when the levels of landslide’s hazards are not capable of being mitigated.

Leading indicators of fiscal distress: evidence from extreme bounds analysis

ABSTRACTEarly warning systems (EWSs) are widely used to assess a country’s vulnerability to fiscal distress. A fiscal distress episode is identified as a period when government experiences extreme funding difficulties. Most EWSs employ a specific set of only fiscal leading indicators predetermined by the researchers, which casts doubt on their robustness. We revisit this issue using extreme bounds analysis, which allows identifying robust leading indicators of fiscal distress from a large set. A robust leading indicator’s effect does not strongly depend on the model specification. Consistent with the theoretical predictions of latest generation crisis models, we find that both fiscal and non-fiscal leading indicators are robust. In addition, we find that a fiscal vulnerability indicator based on fiscal and non-fiscal leading indicators offers a 29% gain in predictive power compared to a traditional one based only on fiscal leading indicators. This suggests that both fiscal and non-fiscal leading indicators should be taken into account when assessing country’s vulnerability to fiscal distress.