Fiscal Rules and the Sovereign Default Premium

Hatchondo, Juan Carlos

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

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Year of publication:	2012
Authors:	Hatchondo, Juan Carlos
Other Persons:	Roch, Francisco (contributor) ; Hatchondo, Juan Carlos (contributor) ; Martinez, Leonardo (contributor)
Publisher:	Washington, D.C : International Monetary Fund
Subject:	Staatsbankrott \| Sovereign default \| Öffentliche Schulden \| Public debt \| Schuldenmanagement \| Debt management \| Haushaltskonsolidierung \| Fiscal consolidation