The historical scenario: (Select 3 that apply) GIVE AN EXPLANATION OF THE ANSWER

1. Is an alternative scenario in which the real GDP growth, the primary balance, and real interest rates are assumed constant and equal to the historical average?
2. Is an alternative scenario in which all variables are extrapolated based on their historical trends (e.g. a path with rising real interest rates)?
3. Is useful to check whether the projections are based on overly optimistic values for the parameters.
4. Can project higher debt ratios than in the baseline in countries which are undergoing credible growth-enhancing transformations.
5. Is particularly useful for countries which have experienced boom-bust episodes.

[Total 25 marks]