Analyzing Fiscal Sustainability
The authors study the implications of fiscal policy behaviour for sovereign risk in a framework that determines a country’s fiscal limit, the point at which, for economic or political reasons, taxes and spending can no longer adjust to stabilize debt. A real business cycle model maps the economic environment - expected fiscal policy, the distribution of exogenous disturbances and private agents’ behaviour - into a distribution for the maximum sustainable debt-to-GDP ratio. Default is possible at any point on this fiscal limit distribution. Calibrations of the model to Greek and Swedish data illustrate how the framework can be used to study actual fiscal reforms undertaken by developed economies facing sovereign risk pressures.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carmen M. Reinhart & Kenneth S. Rogoff, 2008.
"Banking Crises: An Equal Opportunity Menace,"
NBER Working Papers
14587, National Bureau of Economic Research, Inc.
- Mark Aguiar & Gita Gopinath, 2004.
"Defaultable Debt, Interest Rates and the Current Account,"
NBER Working Papers
10731, National Bureau of Economic Research, Inc.
- Aguiar, Mark & Gopinath, Gita, 2006. "Defaultable debt, interest rates and the current account," Journal of International Economics, Elsevier, vol. 69(1), pages 64-83, June.
- Mark Aguiar & Gita Gopinath, 2004. "Defaultable debt, interest rates and the current account," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
- Mark Aguiar & Gita Gopinath, 2004. "Defaultable debt, interest rates, and the current account," Working Papers 04-5, Federal Reserve Bank of Boston.
- Gabriel Cuadra & Horacio Sapriza, 2006.
"Sovereign Default, Interest Rates and Political Uncertainty in Emerging Markets,"
2006-02, Banco de México.
- Cuadra, Gabriel & Sapriza, Horacio, 2008. "Sovereign default, interest rates and political uncertainty in emerging markets," Journal of International Economics, Elsevier, vol. 76(1), pages 78-88, September.
- Trabandt, Mathias & Uhlig, Harald, 2011.
"The Laffer curve revisited,"
Journal of Monetary Economics,
Elsevier, vol. 58(4), pages 305-327.
- Mathias Trabandt & Harald Uhlig, 2006. "How Far Are We From The Slippery Slope? The Laffer Curve Revisited," SFB 649 Discussion Papers SFB649DP2006-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2011.
"When Is the Government Spending Multiplier Large?,"
Journal of Political Economy,
University of Chicago Press, vol. 119(1), pages 78 - 121.
- Lawrence J. Christiano & Martin Eichenbaum & Sergio Rebelo, 2010. "When is the government spending multiplier large?," CQER Working Paper 2010-01, Federal Reserve Bank of Atlanta.
- Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2009. "When is the government spending multiplier large?," NBER Working Papers 15394, National Bureau of Economic Research, Inc.
- Atish R. Ghosh & Jun I. Kim & Enrique G. Mendoza & Jonathan D. Ostry & Mahvash S. Qureshi, 2013.
"Fiscal Fatigue, Fiscal Space and Debt Sustainability in Advanced Economies,"
Royal Economic Society, vol. 0, pages F4-F30, 02.
- Atish R. Ghosh & Jun I. Kim & Enrique G. Mendoza & Jonathan D. Ostry & Mahvash S. Qureshi, 2011. "Fiscal Fatigue, Fiscal Space and Debt Sustainability in Advanced Economies," NBER Working Papers 16782, National Bureau of Economic Research, Inc.
- Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
- Bi, Huixin, 2012.
"Sovereign default risk premia, fiscal limits, and fiscal policy,"
European Economic Review,
Elsevier, vol. 56(3), pages 389-410.
- Huixin Bi, 2010. "Sovereign Default Risk Premia, Fiscal Limits and Fiscal Policy," Caepr Working Papers 2010-007, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
- Huixin Bi, 2011. "Sovereign Default Risk Premia, Fiscal Limits and Fiscal Policy," Working Papers 11-10, Bank of Canada.
- Henning Bohn, 1998. "The Behavior Of U.S. Public Debt And Deficits," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 949-963, August.
- Davig, Troy, 2004. "Regime-switching debt and taxation," Journal of Monetary Economics, Elsevier, vol. 51(4), pages 837-859, May.
- Cristina Arellano, 2008.
"Default Risk and Income Fluctuations in Emerging Economies,"
American Economic Review,
American Economic Association, vol. 98(3), pages 690-712, June.
- Arellano, Cristina, 2008. "Default risk and income fluctuations in emerging economies," MPRA Paper 7867, University Library of Munich, Germany.
- Ugo Panizza, 2008. "Domestic And External Public Debt In Developing Countries," UNCTAD Discussion Papers 188, United Nations Conference on Trade and Development.
- repec:dgr:uvatin:20090102 is not listed on IDEAS
- Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
- Coleman, Wilbur John, II, 1991.
"Equilibrium in a Production Economy with an Income Tax,"
Econometric Society, vol. 59(4), pages 1091-1104, July.
- Wilbur John Coleman II, 1989. "Equilibrium in a production economy with an income tax," International Finance Discussion Papers 366, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:13-27. 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: ()
If references are entirely missing, you can add them using this form.