蝌蚪网 Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Fiscal Rules and the Sovereign Default Premium
蝌蚪网 Journal: Macroeconomics
vol. 14,
no. 4, October 2022
(pp. 244–73)
Abstract
We study fiscal rules using a sovereign default model. A debt-brake (spread-brake) rule imposes a ceiling on the fiscal deficit when the sovereign debt (spread) is above a threshold. For our benchmark calibration, similar gains can be achieved with the optimal debt or spread brake. However, for a "Union" of heterogeneous economies, a common spread brake generates larger gains than a common debt brake. Furthermore, gains from abandoning a common debt brake may be significant for economies that are unnecessarily constrained by the rule. In contrast, abandoning a common spread brake would generate losses for any economy in the Union.Citation
Hatchondo, Juan Carlos, Leonardo Martinez, and Francisco Roch. 2022. "Fiscal Rules and the Sovereign Default Premium." 蝌蚪网 Journal: Macroeconomics 14 (4): 244–73. DOI: 10.1257/mac.20170479Additional Materials
JEL Classification
- E62 Fiscal Policy
- F34 International Lending and Debt Problems
- F41 Open Economy Macroeconomics
- H61 National Budget; Budget Systems
- H63 National Debt; Debt Management; Sovereign Debt