This paper analyzes the effects of macroeconomic shocks on the government debt dynamics in an open economy using the analytical framework of Favero and Giavazzi (2007) extended to an open economy. Applying this modelling approach to the data for the Czech Republic, the authors derive some...

We explore the effects of fiscal and monetary policy shocks on key debt management variables and provide empirical evidence supporting the notion of a strict separation of economic policy from the debt management agenda. We find that a tighter monetary policy coupled with fiscal expansion...