Bianchi, Javier; Ottonello, Pablo; Presno, Ignacio - 2019
The excess procyclicality of fiscal policy is commonly viewed as a central malaise in emerging economies. We document … that procyclicality is more pervasive in countries with higher sovereign risk and provide a model of optimal fiscal policy … with nominal rigidities and endogenous sovereign default that can account for this empirical pattern. Financing a fiscal …