This paper provides evidence on the behavior of public debt managers during fiscal" stabilizations in OECD countries over the last two decades. We find that debt maturity tends to" lengthen the more credible the program, the lower the long-term interest rate and the higher the" volatility of...

We characterize optimal taxation of foreign capital and optimal sovereign debt policy in a small open economy where the government cannot commit to policy and seeks to insure a risk averse domestic constituency. The expected tax on capital is shown to vary with the state of the economy,...

The aging of the population shakes the confidence in the economic viability of pay-as-you-go social security systems. We demonstrate how in a political-economy framework the shaken cofidence leads to the downsizing of the social security-system, and to the emergence of supplemental individual...

We investigate the macroeconomic effects of fiscal consolidations based upon government spending cuts, transfers cuts and tax hikes. We extend a narrative dataset of fiscal consolidations, with details on over 3500 measures for 16 OECD countries. We show that government spending cuts and cuts in...

We develop a model that captures important features of debt crises of the Brazilian type. Its applicability to Brazil lies in the fact that (1) in Brazil the macro fundamentals were sound (e.g., a primary surplus, a relatively low debt/GDP ratio, etc.); and (2) in the Brazilian case the trigger...

Under free capital mobility, confidence crises can result in devaluations even when fixed exchange rates are viable, if fiscal authorities can obtain temporary money financing. During a crisis, domestic interest rates increase reflecting the expected devaluation. Rather than selling debt at...

Bequest constraints have played a major role in discussions of debt neutrality but their welfare implications were not sufficiently dealt with in the literature. In this paper we focus on the welfare implications of bequest constraints. We found that when institutional constraints to the...

This paper proposes a tractable framework to analyze fiscal space and the dynamics of government debt, with a possibly binding zero lower bound (ZLB) constraint. Without the ZLB, a greater primary deficit unambiguously raises debt. However, debt need not explode: When R G - φ, where φ is the...

A shift in taxes or in government spending (a "fiscal shock") at some point in time puts a constraint on the path of taxes and spending in the future, since the government intertemporal budget constraint will eventually have to be met. This simple fact is surprisingly overlooked in analyses of...

We develop a model that captures important features of debt crises of the Brazilian type. Its applicability to Brazil lies in the fact that (1) macro fundamentals were sound in the wake of the crisis (e .g., a non-negligible primary surplus, a relatively low debt/GDP ratio, low inflation, etc.);...