We study optimal fiscal policy in a small open economy (SOE) with sovereign and private default risk. The SOE …

We estimate the pricing of sovereign risk for sixty countries based on fiscal space (debt/tax; deficits/tax) and other … and economically important determinants of market-based sovereign risk. Although the explanatory power of fiscal space … emergence of TED spread as a key pricing factor. However, risk-pricing of the South-West Eurozone Periphery countries is not …

Emerging markets business cycle models treat default risk as part of an exogenous interest rate on working capital …

which financial markets were trying to allocate risk between heterogeneous agents when productive investment opportunities … are scarce. We begin by showing how heterogeneity in terms of risk tolerance can cause financial markets to propagate …

countries. Yet these liabilities are rarely measured, let alone properly adjusted for their risk. This paper shows, by example …, how modern asset pricing can be used to value implicit fiscal debts taking into account their risk properties. The example …

that procyclicality is more pervasive in countries with higher sovereign risk and provide a model of optimal fiscal policy …