Expectations of transfers by central governments incentivize overborrowing by local
governments. In this paper, we ask if fiscal rules can reduce overborrowing if central …

A large literature has developed quantitative versions of the Eaton and Gersovitz (1981)
model to analyze default episodes on external debt. In this paper, we study whether the …

This article studies the optimal design of rules in a dynamic model when there is a time
inconsistency problem and uncertainty about whether the policy maker can commit to follow …

Secondary markets for sovereign bonds are illiquid because of trading frictions. I build a
framework with endogenous illiquidity to study its implications on credit spreads and default …

US states are sovereign entities and can't declare bankruptcy as cities and municipalities.
This paper examines the impact of a switch in sovereign bankruptcy rules that allows …

In this paper, I develop a measure of macroeconomic downside risk-MDR and set a decision-
maker in an investment-consumption problem (Merton (1969), Merton (1971)) in which MDR …

Multinational firms invest more and shift less profits out of countries with strong reputation,
and we relate this to lower corporate tax rates in these countries. We explain these empirical …

The choice of financing public expenditure with taxes or debt (or both) have been widely
investigated by the literature, without finding an ultimate solution. In this article, we take a …

Government debt crises and defaults are recurrent features in emerging market economies
and, as illustrated by the European debt crisis in 2008-2012, they also occur in advanced …

The paper presents a tractable model to understand how international financial institutions
(IFIs) should deal with the sovereign debt crisis of a systemic country, in which case private …