This thesis comprises three self-contained chapters that each contributes new insights to this field of empirical macroeconomics. Chapter 1 examines the role of shocks to consumer misperceptions in explaining macroeconomic fluctuations. This chapter employs a Bayesian estimation of a New...

This paper studies the impact of the state-dependent risk of a government default on the correlation of the scal balance and current account. We use a small open economy model where nonlinear risk premia arise endogenously when the government operates close to its scal limit, i.e. the maximum...