Stress Tests as a Tool to Assess the Risk of Public Expenditure on Debt Servicing Increasing at Local Government Entities

  • Marta Postuła Warsaw University, Faculty of Management
  • Miroslaw Czekaj Warsaw School of Economics, Department of Innovative City; Treasurer of the City of Warsaw
  • Jaroslaw Klepacki University of Social Sciences
Keywords: sub-central government, debt servicing costs, interest rate, risk

Abstract

National and local government's public debt is of special interest to economic sciences. With interest rates in the EU countries now at historically low levels, there is risk of a trend change causing development expenditure to be crowded out from budgets in favour of debt servicing costs. The analysis (stress test) of the sensitivity of debt servicing costs in the local government sector in Poland to an unexpected growth of market interest rates above the values forecasted by the MoF confirms that local governments are exposed to interest rate growth risk, and consequently to the risk of their budgets incurring unplanned expenditure.

Author Biography

Jaroslaw Klepacki, University of Social Sciences

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Published
2019-04-30
Section
Articles