New research published by the International Monetary Fund outlines a method of estimating how much room countries have to respond to “catastrophic” events.

Authors José Ferrer and Alexei Kireyev divide the concept of “policy space” into fiscal, monetary and reserve components. They then create a matrix where each policy is adjusted according to the institutional environment, such as the income level of the country, its access to capital markets and risk of debt distress.

In the working paper