Fiscal Rules and the Sovereign Default Premium
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
This paper finds optimal fiscal rule parameter values and measures the effects of imposing fiscal rules using a default model calibrated to an economy that in the absence of a fiscal rule pays a significant sovereign default premium. The paper also studies the case in which the government conducts a voluntary debt restructuring to capture the capital gains from the increase in its debt market value implied by a rule announcement. In addition, the paper shows how debt ceilings may reduce the procyclicality of fiscal policy and thus consumption volatility.
Series:
Working Paper No. 2012/030
Subject:
Asset and liability management Debt limits Fiscal policy Fiscal rules National accounts Personal income Public debt
English
Publication Date:
January 1, 2012
ISBN/ISSN:
9781463933159/1018-5941
Stock No:
WPIEA2012030
Pages:
28
Please address any questions about this title to publications@imf.org