This paper investigates the impact of credit rating changes on the sovereign spreads in the European Union and investigates the macro and financial factors that account for the time varying effects of a given credit rating change. We find that changes of ratings are informative, economically...

This paper reviews recent research dealing with fiscal discipline and revisit the issues of fiscal control in federal systems, focusing on selective case studies covering the 2000s, before and after the Global Financial Crisis (GFC). We start by contrasting the recent fiscal history of...

This paper looks at the short history of the Eurozone through the lens of an evolutionary approach to forming new institutions. The euro has operated as a currency without a state, under the dominance of Germany. This has so far allowed the euro to achieve a number of design objectives, and this...

We outline two divergent exit strategies of the U.S. from the post COVID-19 debt-overhang, and analyze their implications on Emerging Markets and global stability. The first strategy is the U.S. aiming at returning to the 2019, pre-COVID mode of loose fiscal policy and accommodating monetary...

This paper investigates the behavior of public debt in countries forming a union (as outlined, e.g., by the Maastricht treaty). We consider a federal union of states where the center has limited control over the spending patterns of the union members, and where the union members' behavior has...

We define the notion of a 'de facto fiscal space' of a country as the inverse of the tax-years it would take to repay the public debt. Specifically, we measure the outstanding public debt relative to the de facto tax base, where the latter measures the realized tax collection, averaged across...

The end of the great moderation has profound implications on the assessment of fiscal sustainability. The pertinent issue goes beyond the obvious increase in the stock of public debt/GDP induced by the global recession, to include the neglected perspective that the vulnerabilities associated...

As a share of GDP, the U.S. Federal debt held by the public exceeds 50 percent in FY2009, the highest debt ratio since 1955. Projections indicate the debt ratio may be in the 70-100 percent range within ten years. In many respects, the temptation to inflate away some of this debt burden is...

This paper argues that the frequent failure of the debt swaps is not an accident. Instead, it follows from fundamental forces driven by the market's assessment of the scarcity of fiscal revenue relative to the demand for fiscal outlays. It follows from the observation that arbitrage forces...