Fiscal Risk Assessment at the CBR: A Conceptual Framework

To identify fiscal risk, the CBR uses a pragmatic approach by employing a set of models and indicators, quantitative and qualitative assessments organized in a coherent framework. The inter-temporal net worth serves as an organizing principle. It has the advantage over other frameworks that: i) is directly comparable to budget figures (both ex-ante and ex-post), ii) easier to communicate to policy makers, iii) does not rely on ad-hoc categories but is directly linked to the inter-temporal budget constraint, iv) is embedded in the constitutional Act on Fiscal Responsibility and v) promotes easier detection of fiscal gimmicky. This paper also briefly summarizes the toolkit of the CBR and proposes three „communication devices“, which can in our view help to increase the understanding of fiscal risks among policymakers and the general public.

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