Improving Public Debt Management
In the OIC Member Countries
182
5.2 Macroeconomic Risk Management Macroeconomic risks resulting, for instance, from the real business cycle, exchange rate
changes and other developments in the financial sector and shocks caused by natural disasters,
changes in commodity prices and increased protectionism are likely to influence public debt
developments to a large extent. For example, the global financial crisis starting in 2007 in the
United States gave rise to debt crises in many countries all over the world. Thus,
macroeconomic risk management is an important complement to public debt management. In
general, the same institutions responsible for public debt management are also the main
authorities for macroeconomic risk management, i.e. mainly the Ministries of Finance,
Ministries of the Economy, central banks and coordination bodies on high government level.
The main tools in macroeconomic risk management are information and analytical systems
based on adequate frequency data (quarterly or monthly) providing early warning indicators.
These indicators enable policy makers to react to crises with adequate control measures.
Several best practices are used internationally and OIC member countries are recommended to
consider the following practices:
 The OECD developed a system of indicators providing early signals for changes in the real
economy (business cycle). Data is generated by simple “Business Tendency Surveys”
monthly or quarterly conducted among a representative sample of enterprises. The
surveys are carried out in the individual countries by a partly standardized questionnaire
taking care of individual country characteristics.
 A wellknown methodological framework for currency risk analysis is the socalled
“SignalApproach” (Kaminsky et al. 1998). This method is based on statistical analyses of a
country’s historical experiences with currency crises identifying typical risk factors.
 For more general financial risks, the IMF (2015) developed the “Financial Soundness
Indicators” based on regular data supplies. These indicators are usually produced and
analyzed by central banks. Guidelines on how to prepare these indicators are available
from the IMF.
 More recently, the EU developed a methodology to detect macroeconomic risks at an early
stage by a “Scoreboard Approach”. This alert system uses a scoreboard of indicators (as
well as detailed country studies to consider specific country conditions). Each indicator
incorporates a threshold value and a major deviation from this threshold is seen as a
warning signal. The indicators are distinguished between internal and external factors.
Hence, including external risk factors systematically into the analysis is possible.
Macroeconomic crisis risk analysis methods are being continuously improved. Such methods
are considered important for crisis management and applied by most OECD member countries
as well as a number of emerging economies. It is recommended to apply some of these
methods in OIC member countries as well. COMCEC may potentially provide liaison for
trainings to enable the implementation of these methods.