We analyze how concerns for model misspecification on the part of international lenders affect the desirability of issuing state-contingent debt instruments in a standard sovereign default model a la Eaton and Gersovitz (1981). We show that for the commonly used threshold state-contingent bond...

This paper outlines an approach to assess uncertainty around a forecast baseline as well as the impact of alternative policy rules on macro variability. The approach allows for non-Gaussian shock distributions and non-linear underlying macroeconomic models. Consequently, the resulting...

Using stochastic simulations and stability analysis, the paper compares how different monetary rules perform in a moderately nonlinear model with a time-varying nonaccelerating-inflation-rate-of-unemployment (NAIRU). Rules that perform well in linear models but implicitly embody backward-looking...