蝌蚪网 Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Domestic Policies and Sovereign Default
蝌蚪网 Journal: Macroeconomics
vol. 17,
no. 3, July 2025
(pp. 74–113)
Abstract
A model with two essential elements鈥攕overeign default and distortionary fiscal and monetary policies鈥攅xplains the interaction between sovereign debt, default risk, and inflation in emerging countries. We derive conditions under which monetary policy is actively used to support fiscal policy and characterize the intertemporal trade-offs that determine the choice of debt. We show that in response to adverse shocks to the terms of trade or productivity, governments reduce debt and deficits and increase inflation and currency depreciation rates, matching the patterns observed in the data for emerging economies.Citation
Espino, Emilio, Julian Kozlowski, Fernando M. Martin, and Juan M. S谩nchez. 2025. "Domestic Policies and Sovereign Default." 蝌蚪网 Journal: Macroeconomics 17 (3): 74–113. DOI: 10.1257/mac.20220294Additional Materials
JEL Classification
- E31 Price Level; Inflation; Deflation
- E52 Monetary Policy
- E62 Fiscal Policy
- F34 International Lending and Debt Problems
- F41 Open Economy Macroeconomics
- H63 National Debt; Debt Management; Sovereign Debt
- O23 Fiscal and Monetary Policy in Development