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

Juan Carlos Hatchondo, Leonardo Martinez and Francisco Roch

No 2021/196, IMF Working Papers from International Monetary Fund

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: limit result; debt level; debt-limit rule; debt intolerance; elasticity function; hight-debt-intolerance economy; Fiscal rules; Debt limits; Asset prices (search for similar items in EconPapers)
Pages: 16
Date: 2021-07-23
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=462363 (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 (2022)
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:imf:imfwpa:2021/196

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().