This paper sets out the design of “Maq”: a macro-fiscal model for Ireland. The Maq can be applied to stochastic debt sustainability analysis—a sophisticated analytical technique for assessing the sustainability of public debt—as well as other policy analyses. [1]
What does the Maq do?
Maq is a macro-fiscal model that can be used to assess various things the Fiscal Council is interested in. We can use it to show paths for the government debt ratio recognising the uncertainty around these paths and the complex relationships between different variables. We can also use it to produce tailored shock scenarios and we can use the Maq to develop a comprehensive fiscal stress test for the Irish economy.
What are the advantages of the Maq?
The Maq has a number of useful features.
- It has a detailed interest model including maturity dates and interest rates on Irish debt securities.
- It allows for rich relationships between different variables, such as interest rates and debt levels, and growth and fiscal adjustments.
- The Maq incorporates work by the Fiscal Council on potential output and Irish-specific fiscal multipliers.
- It also focuses on the domestic economy, looking through various distortions.
[1]The opinions expressed and arguments employed in this paper do not necessarily reflect the official views of the Fiscal Council.