A Fiscal Theory Of Sovereign Risk
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A Fiscal Theory Of Sovereign Risk
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Author : Martín Uribe
language : en
Publisher:
Release Date : 2002
A Fiscal Theory Of Sovereign Risk written by Martín Uribe and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Loans, Foreign categories.
This paper presents a fiscal theory of sovereign risk and default. Under certain monetary-fiscal regimes, the risk of default, and thus the emergence of sovereign risk premia, are inevitable. The paper characterizes the equilibrium processes of the sovereign risk premium and the default rate under a number of alternative monetary policy arrangements. Under some of the policy environments considered, the expected default rate and the sovereign risk premium are zero although the government defaults regularly. Under other monetary regimes the default rate and the sovereign risk premium are serially correlated and therefore forecastable. Environments are characterized under which delaying default is counterproductive.
Sovereign Risk Fiscal Policy And Macroeconomic Stability
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Author : Giancarlo Corsetti
language : en
Publisher: International Monetary Fund
Release Date : 2012-01-01
Sovereign Risk Fiscal Policy And Macroeconomic Stability written by Giancarlo Corsetti and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-01-01 with Business & Economics categories.
This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a "sovereign risk channel" through which sovereign default risk raises funding costs in the private sector. If monetary policy is constrained, the sovereign risk channel exacerbates indeterminacy problems: private-sector beliefs of a weakening economy may become self-fulfilling. In addition, sovereign risk amplifies the effects of negative cyclical shocks. Under those conditions, fiscal retrenchment can help curtail the risk of macroeconomic instability and, in extreme cases, even stimulate economic activity.
Sovereign Risk And Belief Driven Fluctuations In The Euro Area
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Author : Giancarlo Corsetti
language : en
Publisher: International Monetary Fund
Release Date : 2013-11-06
Sovereign Risk And Belief Driven Fluctuations In The Euro Area written by Giancarlo Corsetti and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-11-06 with Business & Economics categories.
Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this “sovereign risk channel.” The model is calibrated to the euro area as of mid-2012. We show that a combination of sovereign risk in one region and strongly procyclical fiscal policy at the aggregate level exacerbates the risk of belief-driven deflationary downturns. The model provides an argument in favor of coordinated, asymmetric fiscal stances as a way to prevent selffulfilling debt crises.
Monetary Policy Under A Fiscal Theory Of Sovereign Default
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Author : Andreas Schabert
language : en
Publisher:
Release Date : 2009
Monetary Policy Under A Fiscal Theory Of Sovereign Default written by Andreas Schabert and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
Sovereign Debt
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Author : Rob Quail
language : en
Publisher: John Wiley & Sons
Release Date : 2011-02-25
Sovereign Debt written by Rob Quail and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-02-25 with Business & Economics categories.
An intelligent analysis of the dangers, opportunities, and consequences of global sovereign debt Sovereign debt is growing internationally at a terrifying rate, as nations seek to prop up their collapsing economies. One only needs to look at the sovereign risk pressures faced by Greece, Spain, and Ireland to get an idea of how big this problem has become. Understanding this dilemma is now more important than ever, that's why Robert Kolb has compiled Sovereign Debt. With this book as your guide, you'll gain a better perspective on the essential issues surrounding sovereign debt and default through discussions of national defaults, systemic risk, associated costs, and much more. Historical studies are also included to provide a realistic framework of reference. Contains up-to-date research and analysis on sovereign debt from today's leading practitioners and academics Details the dangers of defaults and their associated systemic risks Explores the past, present, and future of sovereign debt The repercussions of a national default are all-encompassing as global markets are intricately interwoven in the modern world. Sovereign Debt examines what it will take to overcome the challenges of this market and how you can deal with the uncertainty surrounding it.
Managing The Sovereign Bank Nexus
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Author : Mr.Giovanni Dell'Ariccia
language : en
Publisher: International Monetary Fund
Release Date : 2018-09-07
Managing The Sovereign Bank Nexus written by Mr.Giovanni Dell'Ariccia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-09-07 with Business & Economics categories.
This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
Sovereign Risk And The Effects Of Fiscal Retrenchment In Deep Recessions
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Author :
language : en
Publisher:
Release Date : 2011
Sovereign Risk And The Effects Of Fiscal Retrenchment In Deep Recessions written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Country risk categories.
"We analyze the effects of government spending cuts on economic activity in an environment of severe fiscal strain, as reflected by a sizeable risk premium on government debt. Specifically, we consider a "sovereign risk channel," through which sovereign default risk spills over to the rest of the economy, raising funding costs in the private sector. Our analysis is based on a variant of the model suggested by C'urdia and Woodford (2009). It allows for costly financial intermediation and inter-household borrowing and lending in equilibrium, but maintains the tractability of the baseline New Keynesian model. We show that, if monetary policy is constrained in offsetting the effect of higher sovereign risk on private-sector borrowing conditions, the sovereign risk channel exacerbates indeterminacy problems: private-sector beliefs of a weakening economy can become self-fulfilling. Under these conditions, fiscal retrenchment can limit the risk of macroeconomic instability. In addition, if fiscal strain is very severe and monetary policy is constrained for an extended period, fiscal retrenchment may actually stimulate economic activity.
Private Overborrowing Under Sovereign Risk
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Author : Fernando Arce
language : en
Publisher:
Release Date : 2022
Private Overborrowing Under Sovereign Risk written by Fernando Arce and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.
This paper proposes a quantitative theory of the interaction between private and public debt in an open economy. Excessive private debt increases the frequency of financial crises. During such crises the government provides fiscal bailouts financed with risky public debt. This response may cause a sovereign debt crisis, which is characterized by a higher probability of a sovereign default. The model is quantitatively consistent with the evolution of private debt, public debt, and sovereign spreads in Spain from 1999 to 2015, and provides an estimate of the degree of overborrowing, its effect on the spreads, and the optimal macroprudential policy.
The Fallacy Of The Fiscal Theory Of The Price Level
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Author : Willem H. Buiter
language : en
Publisher:
Release Date : 1999
The Fallacy Of The Fiscal Theory Of The Price Level written by Willem H. Buiter and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with Budget categories.
It is not common for an entire scholarly literature to be based on a fallacy, that is, 'on faulty reasoning; misleading or unsound argument'. The 'fiscal theory of the price level', recently re-developed by Woodford, Cochrane, Sims and others, is an example of a fatally flawed research programme. The source of the fallacy is an economic misspecification. The proponents of the fiscal theory of the price level do not accept the fundamental proposition that the government's intertemporal budget constraint is a constraint on the government's instruments that must be satisfied for all admissible values of the economy-wide endogenous variables. Instead they require it to be satisfied only in equilibrium. This economic misspecification has implications for the mathematical or logical properties of the equilibria supported by models purporting to demonstrate the properties of the fiscal approach. These include: overdetermined (internally inconsistent) equilibria; anomalies like the apparent ability to price things that do not exist; the need for arbitrary restrictions on the exogenous and predetermined variables in the government's budget constraint; and anomalous behaviour of the equilibrium' price sequences, including behaviour that will ultimately violate physical resource constraints. The issue is of more than academic interest. Policy conclusions could be drawn from the fiscal theory of the price level that would be harmful if they influenced the actual behaviour of the fiscal and monetary authorities. The fiscal theory of the price level implies that a government could exogenously fix its real spending, revenue and seigniorage plans, and that the general price level would adjust the real value of its contractual nominal debt obligations so as to ensure government solvency. When reality dawns, the result could be painful fiscal tightening, government default, or unplanned recourse to the inflation tax.
The Economics Of Sovereign Debt And Default
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Author : Mark Aguiar
language : en
Publisher: Princeton University Press
Release Date : 2023-09-26
The Economics Of Sovereign Debt And Default written by Mark Aguiar and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-09-26 with Business & Economics categories.
An integrated approach to the economics of sovereign default Fiscal crises and sovereign default repeatedly threaten the stability and growth of economies around the world. Mark Aguiar and Manuel Amador provide a unified and tractable theoretical framework that elucidates the key economics behind sovereign debt markets, shedding light on the frictions and inefficiencies that prevent the smooth functioning of these markets, and proposing sensible approaches to sovereign debt management. The Economics of Sovereign Debt and Default looks at the core friction unique to sovereign debt—the lack of strong legal enforcement—and goes on to examine additional frictions such as deadweight costs of default, vulnerability to runs, the incentive to “dilute” existing creditors, and sovereign debt’s distortion of investment and growth. The book uses the tractable framework to isolate how each additional friction affects the equilibrium outcome, and illustrates its counterpart using state-of-the-art computational modeling. The novel approach presented here contrasts the outcome of a constrained efficient allocation—one chosen to maximize the joint surplus of creditors and government—with the competitive equilibrium outcome. This allows for a clear analysis of the extent to which equilibrium prices efficiently guide the government’s debt and default decisions, and of what drives divergences with the efficient outcome. Providing an integrated approach to sovereign debt and default, this incisive and authoritative book is an ideal resource for researchers and graduate students interested in this important topic.