Most tax systems create a tax bias toward debt finance. Such debt bias increases leverage and may negatively affect … financial stability. This paper models and estimates debt bias in the financial sector, and present novel estimates for … investment banks and non-bank financial intermediaries such as finance and insurance companies. We find debt bias to be pervasive …

We use a new, comprehensive data set on the sovereign debt investor base to document three novel empirical facts: (i …) sovereign debt is repatriated - that is, shifted from external private to domestic investors - prior to sovereign defaults; (ii … nature of defaults matters: external investors do not leave during preemptive debt restructurings. We further show that …

private investment and a severe drag on growth. Compared to adopting a reform that gradually reduces federal debt to its pre …-crisis level, postponing debt stabilization for two decades would entail a permanent output loss of ab …

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 …

The fall in the U.S. public debt/GDP ratio from 106% in 1946 to 23% in 1974 is often attributed to high rates of … interest rates before the Fed-Treasury Accord of 1951. Our central result is a simulation of the path that the debt/GDP ratio … inflation and the pre-Accord peg. In this counterfactual, debt/GDP declines only to 74% in 1974, not 23% as in actual history …

We estimate ex post returns to emerging market debt by combining secondary-market prices with observed flows based on … bond. This reflects the combined effect of the 1980s debt crisis and much higher returns during 1989-2000. Annual returns … high-yield bonds. However, unlike returns on these bonds, emerging market debt returns do not seem significantly correlated …

also studies the case in which the government conducts a voluntary debt restructuring to capture the capital gains from the … increase in its debt market value implied by a rule announcement. In addition, the paper shows how debt ceilings may reduce the …

Over the past three decades, large and persistent discrepancies between the annual change in public debt and the budget … deficit, so-called stock-flow adjustments, were a prominent feature of debt dynamics in many economies. The aim of this paper … stock-flow adjustments to increases in debt is likewise smaller in countries with above average fiscal transparency. This …