Sovereign Debt Risk Premia and Fiscal Policy in Sweden / Huixin Bi, Eric M. Leeper.

Format:

Book

Author/Creator:

Bi, Huixin.

Contributor:

National Bureau of Economic Research.

Leeper, Eric M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15810.

NBER working paper series no. w15810

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

This paper takes a step toward providing a general equilibrium framework within which to study the nub of the current fiscal debate around the world: what are the tradeoffs between short-run stabilization and long-run sustainability when the perceived riskiness of government debt depends, in part, on the current and expected fiscal environment in place? We calibrate a simple model to Swedish fiscal data in two periods: before and after the financial crisis of the early 1990s. We compute the dynamic fiscal limit, which depends on the peak of the Laffer curve, for the pre-crisis and three alternative post-crisis fiscal policies. The model simulates the macroeconomic consequences of alternative policies in the face of the sequence of bad output shocks that Sweden experienced from 1991-1997.

Notes:

Print version record

March 2010.