Original Sin and Procylical Fiscal Policy: Two Sides of the Same Coin?.

Original Sin and Procylical Fiscal Policy: Two Sides of the Same Coin?.

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Bibliographic Details
Author / Creator:	Adler, Gustavo Author.
Imprint:	Washington : International Monetary Fund Sept. 2008.
Description:	1 online resource
Language:	English
Subject:	Fiscal policy -- Econometric models. Business cycles -- Econometric models. Financial crises -- Econometric models. Business cycles -- Econometric models. Financial crises -- Econometric models. Fiscal policy -- Econometric models.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/13514489

Hidden Bibliographic Details
ISBN:	9781451870671 1451870671
Summary:	The paper develops a simple model of sovereign debt where default both through direct repudiation and through inflation are possible and give rise to (endogenous) constraints on the currency composition and the level of public debt. This set up allows to show that procyclicality of fiscal policy in EMEs can arise as a by-product of the "original sin" and both can be explained by the presence of weak monetary institutions which cannot commit to price stability. The paper suggests that, as monetary institutions in EMEs strengthen, the "original sin" would fade away and the cyclical properties of fiscal policy would improve.

Table of Contents:

1. Introduction; 2. Model; 2.1 Households; 2.2 Firms; 2.3 Government; 2.4 Equilibrium Path; 3. The Ramsey Problem; 3.1 The Commitment Case; 3.2 No Commitment; 4. A Stationary Economy; 5. A Temporary Shock; 6. Concluding Remarks; Table; 1; Appendix; A; References