Corsetti, Giancarlo; Kuester, Keith; Meier, André; … - C.E.P.R. Discussion Papers - 2012
fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a 'sovereign risk channel' through which … sovereign default risk raises funding costs in the private sector. If monetary policy is constrained, the sovereign risk channel …, sovereign risk amplifies the effects of negative cyclical shocks. Under those conditions, fiscal retrenchment can help curtail …