established in the literature.

This paper explores the role of bank balance sheets, sovereign default risk, and capital adequacy requirements in amplifying aggregate fluctuations. The paper, first, proposes a unified model of defaultable sovereign debt and bank balance sheets to capture regularities on bank credit to firms,...

This paper explores how banks' balance sheets and sovereign risk affect macroeconomic fluctuations jointly. The heightened sovereign risk and a potential default constrain the banks' ability to extend credit to firms. This happens through the capital requirement that limits the size of the bank...

This paper builds a model of sovereign debt in which default risk, interest rates, and debt depend not only on current fundamentals but also on news about future fundamentals. News shocks affect equilibrium outcomes because they contain information about the likelihood that the government repays...

This paper builds a model of sovereign debt in which default risk, interest rates, and debt depend not only on current fundamentals but also on news about future fundamentals. News shocks affect equilibrium outcomes because they contain information about the future ability of the government to...

This paper builds a model of sovereign debt in which default risk, interest rates, and debt depend not only on current fundamentals but also on news about future fundamentals. News shocks affect equilibrium outcomes because they contain information about the likelihood that the government repays...

This paper builds a model of sovereign debt in which default risk, interest rates, and debt depend not only on current fundamentals but also on news about future fundamentals. News shocks affect equilibrium outcomes because they contain information about the likelihood that the government repays...

We analyze how public debt evolves when successive policymakers have different policy goals and cannot make credible commitments about their future policies. We consider several cases to be able to quantify the effects of imperfect commitment, political disagreement and political turnover....

debt is sensibly increasing in the degree of political disagreement. Lower degree of commitment drives debt toward zero, while the frequency of political turnover does not produce relevant effects.