Economics at your fingertips  

The Transmission of Quasi-Sovereign Default Risk: Evidence from Puerto Rico

Anusha Chari (), Ryan Leary and Toan Phan
Additional contact information
Ryan Leary: University of North Carolina at Chapel Hill
Toan Phan: Federal Reserve Bank of Richmond

No 110, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: Puerto Rico’s unique characteristics as a U.S. territory allow us to examine the transmission of quasi-sovereign default risk to the real economy. We document a negative relationship between increased default probabilities and employment growth in government-demand-dependent industries. The negative relationship strengthens when the government undertakes austerity measures. In addition, fiscal austerity reduces output growth via a local fiscal multiplier effect. Overall, we provide evidence for a novel demand-driven transmission mechanism of sovereign default risk that operates through austerity and government demand dependence.

Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:

Access Statistics for this paper

More papers in 2019 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

Page updated 2019-08-20
Handle: RePEc:red:sed019:110