Advanced Search
MyIDEAS: Login to save this paper or follow this series

Sovereign Default Risk Premia and State-Dependent Twin Deficits


Author Info

  • Hürtgen, Patrick
  • Rühmkorf, Ronald


This paper studies the impact of the state-dependent risk of a government default on the correlation of the scal balance and current account. We use a small open economy model where nonlinear risk premia arise endogenously when the government operates close to its scal limit, i.e. the maximum capacity of a country to repay its debt. The presence of the possible sovereign default leads to dynamics of sovereign debt which cause taxes to rise and increase the dispersion of resulting tax levels. In line with data for industrialized countries household saving increases at high debt-to-GDP levels and the correlation of the scal balance and current account decreases. We calibrate the model to Greece and simulate the debt crisis as a result of negative TFP shocks and nd that the model dynamics t to the data. --

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79834.

as in new window
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:vfsc13:79834

Contact details of provider:
Web page:
More information through EDIRC

Related research


Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:


No references listed on IDEAS
You can help add them by filling out this form.



This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc13:79834. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.