Sovereign Risk, Fiscal Policy, and Macroeconomic Stability /

This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a "sovereign risk channel" through which sovereign default risk raises funding costs in the...

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Manylion Llyfryddiaeth
Prif Awdur: Kuester, Keith
Awduron Eraill: Corsetti, Giancarlo, Meier, Andre, Mueller, Gernot
Fformat: Cylchgrawn
Iaith:English
Cyhoeddwyd: Washington, D.C. : International Monetary Fund, 2012.
Cyfres:IMF Working Papers; Working Paper ; No. 2012/033
Mynediad Ar-lein:Full text available on IMF
Disgrifiad
Crynodeb:This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a "sovereign risk channel" through which sovereign default risk raises funding costs in the private sector. If monetary policy is constrained, the sovereign risk channel exacerbates indeterminacy problems: private-sector beliefs of a weakening economy may become self-fulfilling. In addition, sovereign risk amplifies the effects of negative cyclical shocks. Under those conditions, fiscal retrenchment can help curtail the risk of macroeconomic instability and, in extreme cases, even stimulate economic activity.
Disgrifiad o'r Eitem:<strong>Off-Campus Access:</strong> No User ID or Password Required
<strong>On-Campus Access:</strong> No User ID or Password Required
Disgrifiad Corfforoll:1 online resource (56 pages)
Fformat:Mode of access: Internet
ISSN:1018-5941
Mynediad:Electronic access restricted to authorized BRAC University faculty, staff and students