Fiscal rules and the sovereign default premium /

Fiscal rules and the sovereign default premium /

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Bibliographic Details
Author / Creator:Hatchondo, Juan Carlos, author.
Imprint:[Washington, D.C.] : International Monetary Fund, ©2012.
Description:1 online resource (28 pages) : illustrations
Language:English
Series:IMF working paper ; WP/12/30
IMF working paper ; WP/12/30.
Subject:
Fiscal policy -- Econometric models.
Country risk -- Econometric models.
Default (Finance) -- Econometric models.
Debt relief -- Econometric models.
Country risk -- Econometric models.
Debt relief -- Econometric models.
Default (Finance) -- Econometric models.
Fiscal policy -- Econometric models.
Format: E-Resource Book
URL for this record:http://pi.lib.uchicago.edu/1001/cat/bib/12499985
Hidden Bibliographic Details
Other authors / contributors:Martinez, Leonardo (Economist), author.
Roch, Francisco, author.
IMF Institute, issuing body.
ISBN:9781463933159
1463933150
Notes:At head of title: IMF Institute.
Title from PDF title page (IMF Web site, viewed January 25, 2012).
"January 2012."
Includes bibliographical references.
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.
Table of Contents:
  • Cover; Contents; I. Introduction; II. The model; A. Recursive formulation; B. Fiscal policy; C. Fiscal rules; III. Calibration; IV. Results; Tables; 1. Parameter values; A. The no-rule benchmark; 2. Business cycle statistics; B. Fiscal rules; Figures; 1. Income and government transfers in the benchmark simulations; 2. Borrowing cost and government transfers in the benchmark simulations; 3. Optimal fiscal rules for different levels of the pre-rule sovereign risk premium; 3. Welfare gains for different transition lengths; C. Fiscal rules after a debt restructuring.
  • 4. Debt after the announcement of the rule preferred by the government4. Optimal fiscal rules after a voluntary debt restructuring; 5. Spread after the announcement of the rule preferred by the government; D. Fiscal rules and borrowing opportunities; E. Fiscal rules and the cyclicality of fiscal policy; 6. Spread decline implied by the announcement of a fiscal rule; 5. Simulation results for different debt ceilings; 7. Menu of combinations of spreads and end-of-period debt levels from which a meanincome government can choose; F. Cyclically adjusted fiscal rules.
  • 6. Simulation results with a cyclically adjusted debt ceilingV. Conclusions; 8. Welfare gain from allowing the debt ceiling to depend on current income among rules with an average debt ceiling of 25 percent of mean annual income; 9. Welfare gain from allowing the debt ceiling to depend on current income among rules with an average debt ceiling of 10 percent of mean annual income; References.

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