Numerical Fiscal Rules for Economic Unions: the Role of Sovereign Spreads

Juan Carlos Hatchondo, Leonardo Martinez and Francisco Roch
Additional contact information
Juan Carlos Hatchondo: Western University
Leonardo Martinez: IMF

No 147, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: We study gains from introducing a common numerical fiscal rule in a “Union” of model economies facing sovereign default risk. We show that among economies in the Union, there is significant disagreement about the common debt limit the Union should implement: the limit preferred by some economies can generate welfare losses in other economies. In contrast, a common sovereign spread limit results in higher welfare across economies in the Union.

Keywords: Fiscal Rules; Sovereign Spread; Spread Limit; Debt Dilution; Debt Intolerance (search for similar items in EconPapers)
JEL-codes: F34 F41 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2022-06
New Economics Papers: this item is included in nep-dem, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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https://rednie.eco.unc.edu.ar/files/DT/147.pdf (application/pdf)

Related works:
Journal Article: Numerical fiscal rules for economic unions: The role of sovereign spreads (2022)
Working Paper: Numerical Fiscal Rules for Economic Unions: the Role of Sovereign Spreads (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:147

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