This paper explores the link between default risk and fiscal procyclicality. We show that countries with higher … sovereign risk have a more procyclical fiscal expenditure policy, which is driven mostly by transfers. We build a small open … economy model with income inequality, social transfers, and default risk to rationalize this fact. Without default risk …

sovereign to corporate risk, among other considerations. …

different historical episodes of crises reflect different vulnerabilities in terms of their composition, buildup and responses …