Governments around the world have gone on a massive fiscal expansion in response to the Covid crisis, increasing government debt to levels not seen in 75 years. How will this debt be repaid? What role do conventional and unconventional monetary policy play? We investigate debt sustainability in...

This paper studies the public debt implications of a class of Aiyagari (1994)-Bewley (1977)-Huggett (1993) (ABH) models of incomplete insurance in which agents face a near-zero probability of a highly adverse outcome. In generic models of this kind, there exists a public debt bubble, so that the...

We investigate the implications of extra-normal government spending under the COVID-19 pandemic for commercial bank lending growth between 2019Q4 and 2020Q4 in a large sample of over 3000 banks from 71 countries. We control for pre-pandemic structural factors, bank characteristics and government...

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...

Reducing high public debts is key for countries seeking to restore fiscal capacity and resilience in the wake of recent crises. But large debt reductions are rare. Jamaica stands out for reducing its debt from 144 percent of GDP to 72 percent over the last decade, a record achieved by running...

We study the effects of debt-financed fiscal transfers in a general equilibrium, heterogeneous-agent model of the world economy. In the long run, increases in government debt anywhere raise the world interest rate and increase private wealth everywhere. In the short run, a country with a...