We propose a model-based measure of sovereign credit ratings derived solely from the fiscal position of a country: a forecast of its future debt liabilities, and its potential to use tax policy to repay these. We use this measure to calculate credit ratings for fourteen European countries over...

This paper argues that the crisis was an outcome of EMU: setting a common monetary policy for countries with different initial inflation rates. The crisis countries were those with high inflation rates which then had negative real interest rates and consequently over-borrowed. Current policy...

This paper examines the consequences for the sustainability of fiscal policy of imposing restrictive ceilings on deficits and debt. Our theoretical framework is a generalization of the government intertemporal budget constraint which allows for time-varying interest rates, endogenous primary...