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...

What determines the sustainability of sovereign debt? We develop a model where myopic governments seek popularity but can nevertheless commit credibly to service external debt. They do not default when debt is low because they would lose access to debt markets and be forced to reduce spending;...

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...

Nominal debt provides consumption-smoothing benefits if it can be inflated away during recessions. However, we document empirically that countries with more countercyclical inflation, where nominal debt provides better consumption-smoothing, issue more foreign-currency debt. We propose that...

The European Central Bank is unique in setting monetary policy for several sovereign states with heterogeneous debt levels and different maturity structures. The monetary-fiscal nexus is central to the functioning of the euro area. We focus on one particular aspect of that nexus, the effect the...

This paper presents evidence that public debts in the advanced economies have surged in recent years to levels not recorded since the end of World War II, surpassing the heights reached during the First World War and the Great Depression. At the same time, private debt levels, particularly those...

The textbook optimal policy response to an increase in government debt is simple--monetary policy should actively target inflation, and fiscal policy should smooth taxes while ensuring debt sustainability. Such policy prescriptions presuppose an ability to commit. Without that ability, the...

There are two ways to eliminate this distortion toward successful fiscal restoration. One of them is to make the monetary authority more conservative than society in the sense that the price stability weight of monetary authority is higher than that of society. The other way of eliminating the...

The European Monetary Union is stuck in a severe balance-of-payments imbalance of a nature similar to the one that destroyed the Bretton Woods System. Greece, Ireland, Portugal, Spain and Italy have suffered from balance-of-payments deficits whose accumulated value, as measured by the Target...

Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts. A subtle type of debt restructuring takes the form of "financial repression." Financial repression includes directed lending to government by captive...