Escape clauses for escaping default

Rodrigo Caputo and Felix Ordóñez Jofré ()
Additional contact information
Felix Ordóñez Jofré: Facultad de Administración y Economía.Universidad de Santiago de Chile

FAE-USACH Working Papers Series from Facultad de Administración y Economía. Universidad de Santiago de Chile

Abstract: We study the benefits of introducing escape clauses into debt limit rules. These clauses mitigate the trade-off between expanding government transfers and repaying debt, that policymakers face in recessions. In adverse cycles, the government can issue more debt to sustain government transfers and debt payments, reducing both the probability of default and the sovereign spread. The benefits of escape clauses are present even when they are not active. Classification-JEL F34, F41

Keywords: Debt Limit Fiscal Rules; Escape Clauses; Sovereign Spread; Default. (search for similar items in EconPapers)
Pages: 26 pages
Date: 2023-09, Revised 2023-09
New Economics Papers: this item is included in nep-mac and nep-opm
References: Add references at CitEc
Citations:

Downloads: (external link)
https://usach.alma.exlibrisgroup.com/discovery/del ... rviceCode=AlmaViewer This version: Enero, 2023

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ars:papers:992012340006116

Access Statistics for this paper

More papers in FAE-USACH Working Papers Series from Facultad de Administración y Economía. Universidad de Santiago de Chile Contact information at EDIRC.
Bibliographic data for series maintained by Susana Valdés Mena ().