Journal ArticleDOI
Fiscal Fatigue, Fiscal Space and Debt Sustainability in Advanced Economies
TLDR
The authors used a stochastic model of sovereign default in which risk-neutral investors lend to a government that displays "fiscal fatigue" whereby its ability to increase primary balances cannot keep pace with rising debt.Abstract:
How high can public debt rise without compromising fiscal solvency? We answer this question using a stochastic model of sovereign default in which risk-neutral investors lend to a government that displays ‘fiscal fatigue’, whereby its ability to increase primary balances cannot keep pace with rising debt. As a result, the government faces an endogenous debt limit beyond which debt cannot be rolled over. Using data for 23 advanced economies over the period 1970–2007, we find evidence of a fiscal reaction function with these features, and use it to compute ‘fiscal space’, defined as the difference between current debt ratios and the estimated debt limits.read more
Citations
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Journal ArticleDOI
Growth in a time of debt
Carmen Reinhart,Kenneth Rogoff +1 more
TL;DR: This paper study the relationship between government debt and real GDP growth and find that the relationship is weak for debt/GDP ratios below a threshold of 90 percent of GDP, while for higher levels, growth rates are roughly cut in half.
Journal ArticleDOI
Public debt and economic growth: Is there a causal effect?
TL;DR: This article used an instrumental variable approach to study whether public debt has a causal effect on economic growth in a sample of OECD countries and found that there is no evidence that public debt is associated with economic growth.
Journal ArticleDOI
Public debt and growth: Heterogeneity and non-linearity
TL;DR: In this article, the authors investigate the long-run relationship between public debt and growth in a large panel of countries, and find some support for a negative relationship and no evidence for a similar, let alone common, debt threshold within countries.
Journal ArticleDOI
Is there a debt-threshold effect on output growth?
TL;DR: The authors investigated the relationship between public debt expansion and economic growth and investigated whether the debt-growth relation varies with the level of indebtedness, finding significant negative effects of public debt buildup on output growth.
Journal ArticleDOI
The effect of public debt on growth in multiple regimes
TL;DR: In this paper, the authors employ a structural threshold regression methodology to investigate the heterogeneous effects of debt on growth using public debt as a threshold variable as well as several other plausible variables.
References
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Report SeriesDOI
Initial conditions and moment restrictions in dynamic panel data models
Richard Blundell,Stephen Bond +1 more
TL;DR: In this paper, two alternative linear estimators that are designed to improve the properties of the standard first-differenced GMM estimator are presented. But both estimators require restrictions on the initial conditions process.
Journal ArticleDOI
Debt with Potential Repudiation: Theoretical and Empirical Analysis
Jonathan Eaton,Mark Gersovitz +1 more
Journal ArticleDOI
Growth in a time of debt
Carmen Reinhart,Kenneth Rogoff +1 more
TL;DR: This paper study the relationship between government debt and real GDP growth and find that the relationship is weak for debt/GDP ratios below a threshold of 90 percent of GDP, while for higher levels, growth rates are roughly cut in half.
Journal ArticleDOI
The Behavior of U. S. Public Debt and Deficits
TL;DR: This article showed that the U.S. primary surplus is an increasing function of the debt-GDP ratio and that U. S. fiscal policy is satisfying an intertemporal budget constraint.
Journal ArticleDOI
Default Risk and Income Fluctuations in Emerging Economies
TL;DR: This article developed a small open economy model to study default risk and its interaction with output, consumption, and foreign debt, which predicts that default incentives and interest rates are higher in recessions, as observed in the data.