A Fiscal Theory of Sovereign Risk
By Martin Uribe. Social Science Research Network, 2002
156 citations recorded by the source corpus.
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.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/653a8a5c0686bf11fb260576c7307c66e332b2e8
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In Economics and Econometrics
- E. Baldacci
- S. Gupta
- Carlos Mulas-Granados
- John H. Cochrane
- Xavier Gabaix
- Markus Pelger
- Eric M. Leeper
- Martin Lettau
In Finance
- E. Baldacci
- Carlos Mulas-Granados
- S. Gupta
- John H. Cochrane
- G. Duffee
- Arthur Korteweg
- Armin Schwienbacher
- Junfu Zhang
Citations in the corpus
- The "Mystery of the Printing Press" Monetary Policy and Self-fulfilling Debt Crises (2016, unknown): “Φ = z ( G+ ρBL ) − z ( G+ αρBL ) − αρBL (37)”
- How Effective is Fiscal Policy Response in Systemic Banking Crises? (2009, background): “High public debt levels and past macroeconomic instability limit the scope for countercyclical deficit expansions and hamper the effectiveness of fiscal stimulus measures as markets perceive the higher future fiscal risks entailed by larger deficits (Balduzzi, Corsetti, and Foresi, 1997; Uribe, 2006”
- Money as stock (2005, background): “To model the costs of state-contingent devaluation via inflation, Schmitt- Grohè and Uribe (2001) mix a small amount of price stickiness with distortionary taxes.”