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Fiscal Fatigue, Fiscal Space and Debt Sustainability in Advanced Economies / Atish R. Ghosh, Jun I. Kim, Enrique G. Mendoza, Jonathan D. Ostry, Mahvash S. Qureshi.
- Format:
- Book
- Author/Creator:
- Ghosh, Atish R.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w16782.
- NBER working paper series no. w16782
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2011.
- Summary:
- How high can public debt rise without compromising fiscal solvency? We answer this question using a stochastic ability-to-pay model of sovereign default in which risk-neutral investors lend to a government that displays "fiscal fatigue," because 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 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 projected debt ratios and debt limits.
- Notes:
- Print version record
- February 2011.
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