Policymakers in the United States face a combination of high and rising federal debt and low current and projected interest rates on that debt. Rising future debt will reduce growth and impede efforts to enact new policy initiatives. Low interest rates reduce, but do not eliminate, these...

I study the relationship between political constraints and the probability of sovereign default on external debt using a dynamic stochastic model of fiscal policy augmented with legislative bargaining and default. I find that political constraints and default probability are inversely related if...

We study how political constraints, characterized by the degree of flexibility to choose fiscal policy, affect the probability of sovereign default. To that end, we relax the assumption that policymakers always repay their debt in the dynamic model of fiscal policy developed by Battaglini and...

Emerging countries experience real exchange rate depreciations around defaults. In this paper, we examine this observed pattern empirically and through the lens of a dynamic stochastic general equilibrium model. The theoretical model explicitly incorporates bond issuances in local and foreign...

Emerging countries that have defaulted on their debt repayment obligations in the past are more likely to default again in the future than are non-defaulters even with the same debt-to-GDP ratio. This paper explains this stylized fact within a dynamic stochastic general equilibrium framework by...

This paper explores the dynamics of the Greek public debt and its relationship with the ‘twin deficits’, that is, the public and current account deficits. By modeling the evolution of these variables and using actual data of the Greek economy, this paper shows that the public debt is...

En el presente trabajo se lleva a cabo una evaluación de la sostenibilidad de la deuda pública en Venezuela. En la primera parte del estudio se presenta un breve bosquejo teórico de los modelos para evaluar la sostenibilidad de la deuda pública que aparece reflejado en la literatura...

The structural approach adopted in this paper aims to trace out the evolution of public debt and deficits over a medium term horizon and its dynamic interaction with other key macroeconomic variables such as interest rate, inflation, trade gap and output. The policy simulations for India reveal...

This paper provides evidence on the response of interest rates to Federal budget deficits. A simple model is presented that incorporates the role of monetary policy in the determination of short-run interest rates and that ascribes the effects of government budget imbalances on the term...

Persistently low interest rates in several advanced economies during the past decade have puzzled economists. Explanations on what caused them and what could or even should be done in light of such rates abound. One of the most prominent narratives is the so-called “secular stagnation...