This paper examines the role of sovereign default beliefs for macroeconomic fluctuations and stabilization policy in a small open economy where fiscal solvency is a critical problem. We set up and estimate a DSGE model on Turkish data and show that accounting for sovereign risk significantly...

When is it optimal for a government to default on its legal repayment oblig- ations? We answer this question for a small open economy with domestic production risk in which the government optimally finances itself by issuing non-contingent debt. We show that Ramsey optimal policies occasionally...

When is it optimal for a government to default on its legal repayment obligations? We answer this question for a small open economy with domestic production risk in which contracting frictions make it optimal for the government to finance itself by issuing non-contingent debt. We show that...

We develop a multivariate unobserved components model to extract business cycle and financial cycle indicators from a panel of economic and financial time series of four large developed economies. Our model is flexible and allows for the inclusion of cycle components in different selections of...

Assessing potential output and the output gap is essential for policy-making and fiscal surveillance. The European Commission proposes a production function methodology that involves the estimation of two classes of Gaussian state space models. This paper presents the R package RGAP which...

This paper develops a novel and tractable empirical approach to estimate the cycle in schooling participation decisions, which we denominate the schooling cycle. The estimation procedure is based on unobserved components time series models that decompose higher education enrollment rates into a...

Determining potential output and the output gap-two inherently unobservable variables-is a major challenge for macroeconomists. This paper presents the R package sectorgap, which features a flexible modeling and estimation framework for a multivariate Bayesian state space model identifying...