Given the rise in the government debt level in recent times, this paper aims to examine the effect of an increase in government size on risk premium and its transmission in the economy. We jointly identify the term spread shock (originating at the short end and the long end) and the government...

We study how debt limits can be expansionary in economies facing sovereign risk. We develop a sovereign debt model with capital accumulation, long-term debt, and fiscal rules that features two distortions: debt dilution and a pecuniary externality of private investment on spreads. The optimal...

We study the social and distributional implications of the euro area (EA) sovereign debt crisis in countries that received external financial assistance for macroeconomic adjustments. Combining granular data from about one million survey interviews with households across euro area states carried...