Sovereign default and imperfect tax enforcement

Francesco Pappadà and Yanos Zylberberg

Working Papers from HAL

Abstract: The effect of fiscal policy on default risk is mitigated by the response of tax compliance. To explore the consequences of this stylized fact, we build a model of sovereign debt with limited commitment and imperfect tax enforcement. Fiscal policy persistently affects the size of the informal economy, which impacts future fiscal revenues and default risk. The interaction of imperfect tax enforcement and limited commitment strongly constrains the dynamics of optimal fiscal policy and leads to costly uctuations in consumption.

Keywords: Sovereign default; Imperfect tax enforcement; Fiscal policy (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-dge, nep-iue, nep-mac, nep-opm and nep-pbe
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03142208v1
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Related works:
Working Paper: Sovereign Default and Imperfect Tax Enforcement (2019)
Working Paper: Sovereign default and imperfect tax enforcement (2019)
Working Paper: Sovereign Default and Imperfect Tax Enforcement (2019)
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