We study how macroeconomic shocks affect U.S. public debt dynamics using a VAR with debt feedback. Following a fiscal … austerity shock, the debt ratio initially declines and then returns to its pre-shock path. Yet, the effect is not statistically … times. An inflation shock only slightly reduces the debt ratio for a few quarters. A positive growth shock unambiguously …

that fiscal tightening could raise the debt ratio in the short term, as fiscal gains are partly wiped out by the decline in … output. Although this effect is not long-lasting and debt eventually declines, it could be an issue if financial markets … focus on the short-term behavior of the debt ratio, or if country authorities engage in repeated rounds of tightening in an …

We examine how the cost of corporate credit varies around fiscal consolidations aimed at reducing government debt …