After 2008, the Southern European economies suffered a strong and persistent increase in unemployment. Rising government bond spreads necessitated the implementation of austerity policies. Austerity however, may increase unemployment. If workers lose human capital during unemployment spells, the...

This paper assesses the effects of fiscal consolidations associated with public debt reduction on medium-term output growth during periods of private debt deleveraging. The analysis covers 107 countries and 79 episodes of public debt reduction driven by discretionary fiscal adjustments during...

The wave of sovereign defaults in the early 1980s and the string of debt crises in the decades that followed have fostered proposals involving policy interventions in sovereign debt restructurings. A key question about these proposals that has proved hard to handle is how they in influence the...

Total public debt in most emerging markets grew before and after the pandemic with a sizable share in foreign currency. Along this trend, interest payments increased even in the presence of active fiscal rules in some countries. How should debt management of public debt be set under a fiscal...

We assess, via system GMM, how Stock Flow Adjustments (SFA) affect the debt-to-GDP ratio in 65 countries (covering developed and emerging and low-income countries) between 1985-2014. We find that SFAs positively contribute to the change in the debt-to-GDP ratio with a coefficient close to one....

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...

In this chapter, we use a benchmark limited-commitment model to explore key issues in the economics of sovereign debt. After highlighting conceptual issues that distinguish sovereign debt as well as reviewing a number of empirical facts, we use the model to discuss debt overhang, risk-sharing,...

Highly indebted developing economies commonly also hold large external reserves. This behavior seems puzzling given that governments borrow with an interest rate penalty to compensate lenders for default risk. Although reducing external debt to the same extent as international reserves would...

This paper analyzes the role played by the IMF in eight recent sovereign debt restructurings from a comparative perspective: Argentina (2001-2005), the Dominican Republic (2004-2005), Ecuador (1999-2000), Pakistan (1998-2001), the Russian Federation (1998-2001), Serbia (2000-2004), Ukraine...