The response of an economy to a windfall of foreign exchange (be it aid or natural resource revenues) is often constrained by absorptive capacity. We provide a micro-founded analysis of absorption constraints, based on the idea that expanding the economy’s capital stock (in aggregate or...

In this paper, the author considers sovereign debt in the form of one-period government bonds with default risk, which can be purchased by and traded among domestic and foreign investors. She shows that the "good equilibrium" is the only stable equilibrium under some quite general assumptions,...

The analysis presented in this paper deals with two main issues: the one of debt sustainability, meant in the particular acceptation proposed in this article, and the one of the effects of debt decumulation for the various territorial communities, in particular for the weak areas of Italy...

2008 Küresel Krizi ile mücadele ve krizden çıkış önlemlerinde dikkati çeken ve önemi anlaşılan olgulardan biri mali alan (fiscal space) kavramıdır. Mali alan; devletin finansal durumunu ya da istikrarını olumsuz etkilemeksizin özellikli bir amaç için kullanılacak bütçesel...

This paper focuses on risk premiums paid by central governments in Europe and sub-national governments in Germany, Spain, and Canada. With regard to the European governments, we are interested in how these premiums were affected by the introduction of the euro. Using data for bond yield spreads...

This paper analyzes the introduction of an automatic correction mechanism (ACM) in an economic union whose member states expect to be bailed out in the case of a debt crisis. An ACM can be used to penalize governments that run deficits. We show that if the mechanism is appropriately structured,...

A well-designed public debt management strategy can help countries reduce their borrowing cost, contain financial risks and develop their domestic markets. Using survey data on debt management strategies, this paper studies whether the probability that a country has a formal debt management...

This article examines the extent to which subnational governments may drive sovereign risk premiums. Is subnational fiscal policy affecting the interest rates on central government bonds? Furthermore, we focus on a number of causal mechanisms that may mitigate or reinforce these upstream...

Avocates of formal fiscal restraints on the member states of the European Monetary Union often argue that US experience proves that a monetary union needs such constraints to guarantee the stability of the common currency. We show, first, that the origin of formal fiscal restraints on US state...

The paper presents a new and comprehensive data set of all bonds issued by the sixteen German federal states (Länder) since 1992. It thus provides a complete picture of a capital market comparable in size to the combined corporate bond and commercial paper market in Germany. The quantitative...