Domestic Policies and Sovereign Default

• 成果类型: Article
• 署名作者: Espino, Emilio; Kozlowski, Julian; Martin, Fernando M.; Sanchez, Juan M.
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - St. Louis
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20220294
• 发表日期: 2025
• 页码: 74-113
• 关键词: POLITICAL-ECONOMY; Trade shocks; debt; terms; monetary

摘要

A model with two essential elements-sovereign default and distortionary fiscal and monetary policies-explains the interaction between sovereign debt, default risk, and inflation in emerging countries. We derive conditions under which monetary policy is actively used to support fiscal policy and characterize the intertemporal trade-offs that determine the choice of debt. We show that in response to adverse shocks to the terms of trade or productivity, governments reduce debt and deficits and increase inflation and currency depreciation rates, matching the patterns observed in the data for emerging economies. (JEL E31, E52, E62, F34, F41, H63, O23)