We consider convertible bonds that contractually stipulate payment standstill, contingent on a market indicator of a sovereign's creditworthiness breaching a distress threshold. This financial innovation limits ex-ante the likelihood of debt crises and imposes ex-post risk sharing between...

We express the opinion that sovereign debt sustainability analysis must be augmented by stochastic correlated risk factors and a risk measure to capture tail effects. Crisis situations can thus be adequately specified and analyzed with sufficient accuracy to warrant the relevance of policy...

We develop a model of debt sustainability analysis with optimal financing decisions in the presence of macroeconomic, financial and fiscal uncertainty. We define a coherent measure of refinancing risk, and trade off the risks of debt stock and flow dynamics, subject to debt sustainability...

European Union has taken economic and financial measures to cope with the debt crises erupted in 2009. These measures can be summarized as putting in place a bail-out mechanism and austerity measures, strengthening economic policy coordination, setting up 'Stability and Growth Pact III' and the...

India's expansionary fiscal policy during the recent crisis resulted in higher government borrowing through 2008-09 and 2009-10. This borrowing requirement came in about 83% above the budget estimate in 2008-09, and 65% above the previous year in 2009-10. The debt-to-GDP ratio rose from 69%...

This paper quantitatively assesses the effects of inflation shocks on the public debt-to-GDP ratio in 19 advanced economies using simulation and estimation approaches. The simulations based on the debt dynamics equation and estimations of impulse responses by local projections both suggest that...

Fiscal rules are being increasingly used by both emerging and developed economies. This paper analyzes two alternative fiscal policy rules in terms of their impact on debt sustainability: a rule that fixes the ratio of primary surplus to GDP (quot;fixed surplus rulequot;) and one that sets the...

In recent years debt in Colorado has increased at an unsustainable rate. A debt brake is simulated for the Colorado economy. When the debt brake is triggered the spending cap imposed by the Tabor Amendment is reduced, with surplus revenue earmarked for debt reduction. The simulation analysis...

This paper investigates whether the funding behaviour of euro area debt management offices (DMOs) changed with the start of the ECB's Public Sector Purchase Programme (PSPP). Our results show that (i) lower yield levels and (ii) PSPP purchases supported higher maturities at issuance. The former...