Sovereign Risk Fiscal Policy And Macroeconomic Stability

Author : Giancarlo Corsetti,Mr.Keith Kuester,Mr.Andre Meier,Mr.Gernot J. Mueller
Publisher : International Monetary Fund
Page : 56 pages
File Size : 54,9 Mb
Release : 2012-01-01
Category : Business & Economics
ISBN : 9781463977078

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Sovereign Risk, Fiscal Policy, and Macroeconomic Stability by Giancarlo Corsetti,Mr.Keith Kuester,Mr.Andre Meier,Mr.Gernot J. Mueller Pdf

This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a "sovereign risk channel" through which sovereign default risk raises funding costs in the private sector. If monetary policy is constrained, the sovereign risk channel exacerbates indeterminacy problems: private-sector beliefs of a weakening economy may become self-fulfilling. In addition, sovereign risk amplifies the effects of negative cyclical shocks. Under those conditions, fiscal retrenchment can help curtail the risk of macroeconomic instability and, in extreme cases, even stimulate economic activity.

Author : Anonim
Publisher : Unknown
Page : 0 pages
File Size : 47,8 Mb
Release : 2012
Category : Country risk
ISBN : OCLC:1181084986

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Sovereign Risk, Fiscal Policy, and Macroeconomic Stability by Anonim Pdf

This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a 'sovereign risk channel' through which sovereign default risk raises funding costs in the private sector. If monetary policy is constrained, the sovereign risk channel exacerbates indeterminacy problems: private-sector beliefs of a weakening economy may become self-fulfilling. In addition, sovereign risk amplifies the effects of negative cyclical shocks. Under those conditions, fiscal retrenchment can help curtail the risk of macroeconomic instability and, in extreme cases, even stimulate economic activity.

Author : Giancarlo Corsetti
Publisher : Unknown
Page : 55 pages
File Size : 46,7 Mb
Release : 2012-01-01
Category : Country risk
ISBN : 1463933185

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Sovereign Risk, Fiscal Policy, and Macroeconomic Stability by Giancarlo Corsetti Pdf

This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a "sovereign risk channel" through which sovereign default risk raises funding costs in the private sector. If monetary policy is constrained, the sovereign risk channel exacerbates indeterminacy problems: private-sector beliefs of a weakening economy may become self-fulfilling. In addition, sovereign risk amplifies the effects of negative cyclical shocks. Under those conditions, fiscal retrenchment can help curtail the risk of macroeconomic instability and, in extreme cases, even stimulate economic activity.

Author : Giancarlo Corsetti,Mr.Keith Kuester,Mr.Andre Meier,Mr.Gernot J. Mueller
Publisher : International Monetary Fund
Page : 49 pages
File Size : 52,7 Mb
Release : 2013-11-06
Category : Business & Economics
ISBN : 9781475516807

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Sovereign Risk and Belief-Driven Fluctuations in the Euro Area by Giancarlo Corsetti,Mr.Keith Kuester,Mr.Andre Meier,Mr.Gernot J. Mueller Pdf

Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this “sovereign risk channel.” The model is calibrated to the euro area as of mid-2012. We show that a combination of sovereign risk in one region and strongly procyclical fiscal policy at the aggregate level exacerbates the risk of belief-driven deflationary downturns. The model provides an argument in favor of coordinated, asymmetric fiscal stances as a way to prevent selffulfilling debt crises.

Author : Mr.Xavier Debrun,Radhicka Kapoor
Publisher : International Monetary Fund
Page : 48 pages
File Size : 43,6 Mb
Release : 2010-05-01
Category : Business & Economics
ISBN : 9781455200702

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Fiscal Policy and Macroeconomic Stability by Mr.Xavier Debrun,Radhicka Kapoor Pdf

The paper revisits the link between fiscal policy and macroeconomic stability. Two salient features of our analysis are (1) a systematic test for the government’s ambivalent role as a shock absorber and a shock inducer—removing a downward bias present in existing estimates of the impact of automatic stabilizers—and (2) a broad sample of advanced and emerging market economies. Results provide strong support for the view that fiscal stabilization operates mainly through automatic stabilizers. Also, the destabilizing impact of policy changes not systematically related to the business cycle may not be as robust as suggested in the literature.

Author : Mr.Cristiano Cantore,Mr.Paul L Levine,Mr.Giovanni Melina,Joseph G Pearlman
Publisher : International Monetary Fund
Page : 44 pages
File Size : 53,7 Mb
Release : 2017-03-30
Category : Business & Economics
ISBN : 9781475590180

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Optimal Fiscal and Monetary Policy, Debt Crisis and Management by Mr.Cristiano Cantore,Mr.Paul L Levine,Mr.Giovanni Melina,Joseph G Pearlman Pdf

The initial government debt-to-GDP ratio and the government’s commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidation is very slow. A faster pace is optimal when the economy starts from a high level of public debt implying high sovereign risk premia, unless these are suppressed via a bailout by official creditors. Under discretion, the cost of not being able to commit is reflected into a quick consolidation of government debt. Simple monetary-fiscal rules with passive fiscal policy, designed for an environment with “normal shocks”, perform reasonably well in mimicking the Ramsey-optimal response to one-off government debt shocks. When the government can issue also long-term bonds–under commitment–the optimal debt consolidation pace is slower than in the case of short-term bonds only, and entails an increase in the ratio between long and short-term bonds.

Author : International Monetary Fund. Fiscal Affairs Dept.
Publisher : International Monetary Fund
Page : 78 pages
File Size : 48,7 Mb
Release : 2016-12-10
Category : Business & Economics
ISBN : 9781498345200

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Tax Policy, Leverage and Macroeconomic Stability by International Monetary Fund. Fiscal Affairs Dept. Pdf

Risks to macroeconomic stability posed by excessive private leverage are significantly amplified by tax distortions. ‘Debt bias’ (tax provisions favoring finance by debt rather than equity) has increased leverage in both the household and corporate sectors, and is now widely recognized as a significant macroeconomic concern. This paper presents new evidence of the extent of debt bias, including estimates for banks and non-bank financial institutions both before and after the global financial crisis. It presents policy options to alleviate debt bias, and assesses their effectiveness. The paper finds that thin capitalization rules restricting interest deductibility have only partially been able to address debt bias, but that an allowance for corporate equity has generally proved effective. The paper concludes that debt bias should feature prominently in countries’ tax reform plans in the coming years.

Author : International Monetary Fund. Fiscal Affairs Dept.
Publisher : International Monetary Fund
Page : 64 pages
File Size : 49,8 Mb
Release : 2006-01-27
Category : Business & Economics
ISBN : 9781498333016

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Fiscal Adjustment for Stability and Growth by International Monetary Fund. Fiscal Affairs Dept. Pdf

This paper aims to inform policymakers, and other interested parties, about the IMF’s approach to fiscal adjustment. The approach focuses on the role of sound and sustainable government finances in promoting macroeconomic stability and growth. Achieving, and maintaining, such a fiscal position often requires adjusting fiscal policy, as well as strengthening fiscal institutions. Fiscal adjustment may involve either tightening or loosening the fiscal stance, depending on individual country circumstances.

Author : Elva Bova,Paulo Medas,Tigran Poghosyan
Publisher : Unknown
Page : 128 pages
File Size : 47,8 Mb
Release : 2016
Category : Business cycles
ISBN : 1498377505

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Macroeconomic Stability in Resource-rich Countries by Elva Bova,Paulo Medas,Tigran Poghosyan Pdf

Author : Mr.Giovanni Dell'Ariccia,Caio Ferreira,Nigel Jenkinson,Mr.Luc Laeven,Alberto Martin,Ms.Camelia Minoiu,Alex Popov
Publisher : International Monetary Fund
Page : 54 pages
File Size : 50,7 Mb
Release : 2018-09-07
Category : Business & Economics
ISBN : 9781484359624

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Managing the Sovereign-Bank Nexus by Mr.Giovanni Dell'Ariccia,Caio Ferreira,Nigel Jenkinson,Mr.Luc Laeven,Alberto Martin,Ms.Camelia Minoiu,Alex Popov Pdf

This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.

Author : Thomas Stratmann,Bernardin Akitoby
Publisher : INTERNATIONAL MONETARY FUND
Page : 26 pages
File Size : 45,8 Mb
Release : 2006-01-01
Category : Electronic
ISBN : 1451862768

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Fiscal Policy and Financial Markets by Thomas Stratmann,Bernardin Akitoby Pdf

This paper introduces fiscal policy in a model of sovereign risk spreads ("spreads"). Using panel data from emerging market countries, we find that reductions in public expenditure are a more powerful tool for reducing spreads than increases in revenues. Specifically, cuts in current spending lower spreads by more than cuts in investment spending, and they also lower spreads by more than increases in revenue. We also show that debt-financed current spending increases sovereign risk by more than tax-financed current spending, suggesting that international investors have some preference for the latter. In line with the empirical literature on the determinants of spreads, we find that liquidity and solvency indicators, as well as macroeconomic fundamentals, are also important determinants of spreads.

Author : Mr.Udaibir S. Das,Mr.Adnan Mazarei,Han van der Hoorn
Publisher : International Monetary Fund
Page : 330 pages
File Size : 53,9 Mb
Release : 2010-12-09
Category : Business & Economics
ISBN : 9781589069275

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Economics of Sovereign Wealth Funds by Mr.Udaibir S. Das,Mr.Adnan Mazarei,Han van der Hoorn Pdf

The book covers a wide range of topics of relevance to policymakers in countries that have sovereign wealth funds (SWFs) and those that receive SWF investments. Renowned experts in the field have contributed chapters. The book is organized around four themes: (1) the role and macrofinancial linkages of SWFs, (2) institutional factors, (3) investment approaches and financial markets, and (4) the postcrisis outlook. The book also discusses the challenges facing sovereign wealth funds in the coming years, from an inside perspective on countries, including Canada, Chile, China, Norway, Russia, and New Zealand. Economics of Sovereign Wealth Funds will contribute to a further understanding of the nature, strategies and behavior of SWFs and the environment in which they operate, as their importance is likely to grow in the coming years.

Author : Michael Frenkel,Alexander Karmann,Bert Scholtens
Publisher : Springer Science & Business Media
Page : 263 pages
File Size : 48,5 Mb
Release : 2013-03-14
Category : Business & Economics
ISBN : 9783662099506

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Sovereign Risk and Financial Crises by Michael Frenkel,Alexander Karmann,Bert Scholtens Pdf

Sovereign risk and financial crises play a key role in current international economic developments, particularly in the case of economic downturns. As the Asian economic crisis in the late 1990s revealed once again, financial crises are the rule rather than the exception in capitalist economies. The event also revealed that international public debt agreements are contingent claims. In a world of increasing economic interdependencies, the issues of financial crises and country defaults are of critical importance. This volume goes to the heart of the academic discussion on sovereign risk and financial crises by centering on quantitative-empirical aspects, evaluating prominent approaches, and by proposing new methods. Part I of the volume identifies key factors and processes that are central in analyzing sovereign risk while Part II focuses on the determinants and effects of financial crises.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 88 pages
File Size : 45,9 Mb
Release : 2014-12-22
Category : Business & Economics
ISBN : 9781498342438

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From Banking to Sovereign Stress - Implications For Public Debt by International Monetary Fund Pdf

This paper explores how banking sector developments and characteristics influence the propagation of risks from the banking sector to sovereign debt, including how they affect the extent of fiscal costs of banking crises when those occur. It then proposes practices and policies for the fiscal authorities to help manage the risks and enhance crisis preparedness.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 33 pages
File Size : 46,7 Mb
Release : 1998-03-01
Category : Business & Economics
ISBN : 9781451844238

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Coordination of Monetary and Fiscal Policies by International Monetary Fund Pdf

Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.