We develop a theory of sectoral fluctuations driven by the propagation of demand shocks along supply chains with heterogeneous time-to-build production. We solve the model in closed form. Downstream producers respond directly to current demand. Upstream producers, due to time-to-build delays,...

By preemptive austerity, we mean a policy that increases taxes to deter potential rollover crises. The policy is so successful that the usual danger signal of a rollover crisis, a high yield on new bonds sold, does not show up because the policy eliminates the danger. Mechanically, high taxes...