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Léonardo MARTINEZ (IMF ) – “Fiscal Rules and the Sovereign Default Premium”, joint with Juan Carlos Hatchondo and Francisco Roch.

April 9, 12:15 pm - 1:30 pm

Time: 12:15pm – 13:30 pm
Date: 09th of April 2018
Place: Room 3001

Léonardo MARTINEZ (IMF ) – “Fiscal Rules and the Sovereign Default Premium “, joint with Juan Carlos Hatchondo and Francisco Roch.

Abstract : We use a sovereign default model to study the effects of introducing fiscal rules. A debt-brake (spread-brake) rule imposes a ceiling on the government budget balance with the objective of upholding sovereign debt (spread) levels below a threshold. For a single model economy, similar welfare gains can be achieved with either a debt brake or a spread brake. However, for sets of heterogeneous economies, a common spread brake generates larger welfare gains than a common debt brake. This suggests that when political constraints force common fiscal targets across economies, a common spread brake may be preferable over a common debt brake. Even if we could tailor fiscal rules to a single economy, a spread brake would be a better option when there is uncertainty about key characteristics of this economy and these  characteristics may change over time.

 

Details

Date:
April 9
Time:
12:15 pm - 1:30 pm
Event Categories:
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Organizers

Edouard CHALLE
Julien PRAT