Emerging countries experience real exchange rate depreciations around defaults. In this paper, we examine this observed pattern empirically and through the lens of a dynamic stochastic general equilibrium model. The theoretical model explicitly incorporates bond issuances in local and foreign...

Emerging countries that have defaulted on their debt repayment obligations in the past are more likely to default again in the future than are non-defaulters even with the same debt-to-GDP ratio. This paper explains this stylized fact within a dynamic stochastic general equilibrium framework by...

This paper explores the dynamics of the Greek public debt and its relationship with the ‘twin deficits’, that is, the public and current account deficits. By modeling the evolution of these variables and using actual data of the Greek economy, this paper shows that the public debt is...

The structural approach adopted in this paper aims to trace out the evolution of public debt and deficits over a medium term horizon and its dynamic interaction with other key macroeconomic variables such as interest rate, inflation, trade gap and output. The policy simulations for India reveal...

This paper provides evidence on the response of interest rates to Federal budget deficits. A simple model is presented that incorporates the role of monetary policy in the determination of short-run interest rates and that ascribes the effects of government budget imbalances on the term...

This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth...

The aim of this study is to develop a new framework (V-L-D) for detecting the short term vulnerabilities in fiscal policy for the European Union countries. The methodology relies ontwo distinct indicators: one showing the vulnerabilities signalled by the size of the cyclically adjusted budget...

The purpose of this study is to check the Ricardian Equivalence Hypothesis in case of Pakistan by using annual data for the period of 1973-2009. Government expenditure, private consumption expenditure, tax revenue, government debt, disposable income, government budget deficit and wealth are the...

Rapidly rising deficits at both the federal and state and local government levels, along with long-term financing problems in the Social Security and Medicare programs, have triggered a one-sided austerity-focused class war in the US. Similar class conflicts have broken out around the globe. A...

As it also happened in many Latin American countries during the 60s and 70s, inflation became one of the main economic problems in the Brazilian economy. The acceleration of prices and hyperinflation coexisted not only with periods of economic expansion (1956-1979), but also with huge...