We study the nature of systemic sovereign credit risk using CDS spreads for the U.S. Treasury, individual U.S. states, and major Eurozone countries. Using a multifactor affine framework that allows for both systemic and sovereign-specific credit shocks, we find that there is much less systemic...

McCallum (2009) argues that "learnability" can save new-Keynesian models from indeterminacies. He claims the unique bounded equilibrium is learnable, and the explosive equilibria are not. However, he assumes that agents can directly observe the monetary policy shock. Reversing this assumption, I...