Sovereigns' public capital and fiscal constraint influence sovereign debt crises and resolution. We compile a dataset on public expenditure composition around restructurings with private external creditors. We show that during restructurings, public investment (i) experiences severe decline and...

Political risk is a significant determinant of bond yields and economic growth in both developed and emerging markets and we develop a debt sustainability analysis model with both channels using a country ratings proxy of political risk. Political risk also affects a sovereign's willingness to...

Contingent sovereign debt can create important welfare gains. Nonetheless, there is almost no issuance today. Using hand-collected archival data, we examine the first known case of large-scale use of state-contingent sovereign debt in history. Philip II of Spain entered into hundreds of...

This paper argues that the Eurozone crisis stems from a risk management failure in the Eurosystem's design, and that applying insurance theory is useful. We model risk neutral agents choosing portfolios of government bonds of n countries in a monetary union and other assets. We firstly analyse a...

Government debt has risen substantially in emerging market and developing economies (EMDEs) since the global financial crisis. The current environment of low global interest rates and weak growth may appear to mitigate concerns about elevated debt levels. Considering currently subdued...

In this paper we analyse the effects of all sources of the accumulation of nonfinancial debt (household, corporate as well as government) on economic growth in ten euro-area countries during the 1980-2015 period. To this end, we make use of three models (a baseline, an asymmetric and a threshold...

Acknowledging the potential detrimental impact that twin-deficits may have on sovereign risk, this study uses a two-step approach to assess the impact of fiscal and external sustainability on sovereign risk dynamics for a panel of 27 European Economies between 2001Q4 and 2022Q3. To do so, we...

This paper studies the effects of government capital accumulation on sovereign debt default risk and debt restructuring renegotiation outcomes when government has limited ability to extract revenues from households. We develop a quantitative dynamic stochastic general equilibrium model of...

What are the macroeconomic effects of tax adjustments in response to large public debt shocks in highly integrated economies? The answer from standard closed-economy models is deceptive, because they underestimate the elasticity of capital tax revenues and ignore crosscountry spillovers of tax...