Template%20for%20External%20Sustainability%0D%0AAssessment

Technical Notes

Template for External Sustainability Assessment


CODE: IDB-TN-1095
AUTHOR(s): Castillo, Marola
PUBLISHED: September 2016
LANGUAGE: English
RELATED TOPICS: Macroeconomics
DOWNLOAD FILE IN: English

Abstract:

This manual explains in detail the external sustainability assessment approach following Castillo (2016), given by the stock-flow relationship among net external positions, non-income current account, 1 and real exchange rate. This approach consists of determining the non-income current account over GDP that would stabilize a benchmark net foreign asset (NFA) position over the mediumterm, and a “gap” by comparing the NFA-stabilizing non-income current account over GDP with its value expected to prevail over the medium term. The text develops an External Sustainability Template and provides guidance in the customization of empirical assessments by addressing three methodologies: Standard Approach, Endogenous Net Foreign Assets Dynamics Approach, and Fan-Charts Approach.

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