Sovereign Debt Risk Premia and Fiscal Policy in Sweden
Huixin Bi () and
Eric Leeper ()
No 15810, NBER Working Papers from National Bureau of Economic Research, Inc
This paper takes a step toward providing a general equilibrium framework within which to study the nub of the current fiscal debate around the world: what are the tradeoffs between short-run stabilization and long-run sustainability when the perceived riskiness of government debt depends, in part, on the current and expected fiscal environment in place? We calibrate a simple model to Swedish fiscal data in two periods: before and after the financial crisis of the early 1990s. We compute the dynamic fiscal limit, which depends on the peak of the Laffer curve, for the pre-crisis and three alternative post-crisis fiscal policies. The model simulates the macroeconomic consequences of alternative policies in the face of the sequence of bad output shocks that Sweden experienced from 1991-1997.
JEL-codes: E6 E62 H2 H5 H6 (search for similar items in EconPapers)
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Published as “Sovereign Debt Risk Premia and Fiscal Policy in Sweden,” Swedish Economic Policy Review, 2010 (with Huixin Bi)
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Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:15810
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