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Fiscal Policy and Default Risk in Emerging Markets

Author

Listed:
  • Juan M. Sanchez

    (FRB Richmond)

  • Horacio Sapriza

    (Board of Governors FRS and Rutgers University)

  • Gabriel Cuadra

    (Banco de Mexico)

Abstract

is characterized by countercyclical default risk. In this paper we develop a quantitative dynamic stochastic small open economy model with incomplete markets,endogenous fiscal policy and sovereign and private sector default where public expenditures and tax rates are optimally procyclical. The model also accounts for the dynamics of other key macroeconomic variables in emerging economies.

Suggested Citation

  • Juan M. Sanchez & Horacio Sapriza & Gabriel Cuadra, 2009. "Fiscal Policy and Default Risk in Emerging Markets," 2009 Meeting Papers 701, Society for Economic Dynamics.
  • Handle: RePEc:red:sed009:701
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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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