The paper is organized around the following question: when the economy moves from a debtGDP level where the probability of default is nil to a higher level the "fiscal limit" where the default probability is non-negligible, how do the effects of routine monetary operations designed to achieve...

In der Debatte um die Schuldenbremse geht es zumeist um eine Grundgesetzänderung. Dabei ist ein wesentlicher Teil der Schuldenbremse - die Konjunkturkomponente, welche eine Defizitbeschränkung mit antizyklischer Fiskalpolitik vereinen soll - einfachgesetzlich definiert. Sieht man sich diese...

In order to enhance fiscal sustainability and regain “investment grade” credit rating, in 2011 Colombia implemented a fiscal rule (FR) on the Central Government's structural balance. Investment grade was rapidly attained, and FR targets were complied with, until 2019. Using the Synthetic...

This paper analyses fiscal policy for several economies in Latin America, from the early nineties to the 2009 crisis. We present original estimates of cyclically-adjusted public revenues for Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Uruguay implementing the standardised...

The new fiscal rule recently proposed in Korea is unique as it imposes a ceiling on a combination of the debt-to-GDP and deficit-to-GDP ratios rather than separate ceilings on each. This paper attempts to assess empirically the degree of adjustment needed to satisfy the new fiscal rule as well...

We revisit the link between the risk of sovereign default and default costs. Contrary to prior literature, we show that higher costs of default may result in higher default probabilities, lower bond prices, and fiscal limits that are not pinned down by economic fundamentals. Government debt...

In both developed and developing countries, there are basically two main sources of economic instability: exogenous shocks and inappropriate policies. Exogenous shock (terms-of-trade shocks, natural disasters and capital flow reversals) can throw an economy into disequilibrium and therefore...

We present new evidence showing that fiscal austerity strengthens support for redistribution, especially for the relatively well-off. Our theoretical model proposes two mechanisms to explain this heterogeneity in support for redistribution: "altruism" and "appreciation". We test our theoretical...

The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition - either tax- or spending-based - are uncertain. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt, and...

We present new evidence showing that fiscal austerity strengthens support for redistribution, especially for the relatively well-off. Our theoretical model proposes two mechanisms to explain this heterogeneity in support for redistribution: ‘altruism’ and ‘appreciation’. We test our...