IDEAS home Printed from https://ideas.repec.org/p/ars/papers/992012340006116.html
   My bibliography  Save this paper

Escape clauses for escaping default

Author

Listed:
  • Caputo,Rodrigo
  • Ordóñez Jofré, Felix

    (Facultad de Administración y Economía.Universidad de Santiago de Chile)

Abstract

We study the benefits of introducing escape clauses into debt limit rules. These clauses mitigate the trade-off between expanding government transfers and repaying debt, that policymakers face in recessions. In adverse cycles, the government can issue more debt to sustain government transfers and debt payments, reducing both the probability of default and the sovereign spread. The benefits of escape clauses are present even when they are not active. Classification-JEL F34, F41

Suggested Citation

  • Caputo,Rodrigo & Ordóñez Jofré, Felix, 2023. "Escape clauses for escaping default," FAE-USACH Working Papers Series 992012340006116, Facultad de Administración y Economía. Universidad de Santiago de Chile, revised Sep 2023.
    • Handle: RePEc:ars:papers:992012340006116
    as

    Download full text from publisher

    File URL: https://usach.alma.exlibrisgroup.com/discovery/delivery/56USACH_INST:56USACH_INST/1257626030006116?lang=es&viewerServiceCode=AlmaViewer
    File Function: This version: Enero, 2023
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Debt Limit Fiscal Rules; Escape Clauses; Sovereign Spread; Default.;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ars:papers:992012340006116. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Susana Valdés Mena (email available below). General contact details of provider: https://edirc.repec.org/data/faschcl.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.