02185cas a2200277 a 4500 AALejournalIMF017027 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475523607 1018-5941 BD-DhAAL BD-DhAAL Adedeji, Olumuyiwa. A Probabilistic Approach to Fiscal Space and Prudent Debt Level : Application to Low-Income Developing Countries / Olumuyiwa Adedeji, Calixte Ahokpossi, Claudio Battiati, Mai Farid. Washington, D.C. : International Monetary Fund, 2016. 1 online resource (20 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students What constitutes fiscal space or a prudent level of debt to conduct countercyclical policy while ensuring debt sustainability? This paper addresses the question by exploring the relationship between debt dynamics, and the probabilistic distribution of the primary balance and the effective interest rate. This proposed approach is useful in situations where the lack of relevant data makes it difficult to estimate detailed fiscal reaction functions. Applying this approach to Low-Income Developing Countries (LIDCs) and based on various debt ceiling assumptions, we find that about 60 percent of these countries presently have fiscal policy space to address adverse shocks, subject to the availability of domestic and external financing. Countries with strong institutional capacity tend to have more fiscal space, and countries with weak institutional capacity, mostly countries in conflict and fragile states, tend to lack fiscal space. Mode of access: Internet Ahokpossi, Calixte. Battiati, Claudio. Farid, Mai. IMF Working Papers; Working Paper ; No. 2016/163 Full text available on IMF http://elibrary.imf.org/view/journals/001/2016/163/001.2016.issue-163-en.xml IMF e-Library