The excess procyclicality of fiscal policy is commonly viewed as a central malaise in emerging economies. We document that procyclicality is more pervasive in countries with higher sovereign risk and provide a model of optimal fiscal policy with nominal rigidities and endogenous sovereign...

How do macro-financial shocks affect investor behavior and market dynamics? Recent evidence suggests long-lasting effects of personally experienced outcomes on investor beliefs and investment but also significant differences across older and younger generations. We formalize experience-based...