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Cover -- Do Fiscal Rules Cause Better Fiscal Balances? A New Instrumental Variable Strategy -- I. INTRODUCTION -- II. A NEW INSTRUMENTAL VARIABLES STRATEGY -- III. EMPIRICAL SETUP AND DATA -- IV. RESULTS -- V. ROBUSTNESS CHECKS FOR THE CONTIGUITY INSTRUMENT -- VI. EXTENSIONS TO FISCAL RULE STRENGTH -- VII. CONCLUSION -- VIII. REFERENCES -- IX. FIGURES -- X. TABLES -- XI. APPENDIX.

Cover -- Contents -- Abstract -- I. Introduction -- II. Data and Descriptive Statistics -- III. Estimation Under Selection on Observables: Inverse Probability Weighting -- IV. Effects on the Distribution of Deficits and Bunching Estimation -- V. Robustness Checks -- VI. Country-Specific Results -- VII. Conclusion -- VIII. References -- IX. Appendix -- Tables -- Table 1. Summary statistics -- Table 2. Logit Marginal Effects -- Table 3. Covariate Balancing -- Table 4. General Government Balance: Bunching Estimates -- Table 5. Bunching Estimates with alternative Weighting Schemes -- Table 6. Bunching Estimates with Clustering by Wave -- Table A1. Countries and 3 percent Rule's Adoption Dates -- Table A2. Determinants of Fiscal Rules Adoption -- Table A3. Average Treatment Effect Results -- Table A4. Bunching Results for Different Subperiods -- Figures -- Figure 1. Government Balance Distributions -- Figure 2. Densities of the Estimated Propensity Scores -- Figure 3. Inverse Probability Weights for the Counterfactual Group -- Figure 4. Treated and Counterfactual Government Balance Distributions -- Figure 5. Government Balance Distributions with alternative First Stage Models -- Figure 6. Government Balance Distributions with alternative Weighting Schemes -- Figure 7. Average Impact of the FR by Country Based on Rank Invariance -- Figure 8. Individualized Treatment Effects by Le vel of Deficit -- Figure 9. Individualized Treatment Effects by Le vel of Debt -- Figure A1. Vertical Difference between Treatment and Counterfactual Densities -- Figure A2. Counterfactual Time Paths for General Government Balance

This paper studies whether countries benefit from servicing their debts during times of widespread sovereign defaults. Colombia is typically regarded as the only large Latin American country that did not default in the 1980s. Using archival research and formal econometric estimates of Colombia's probability of default, we show that in the early 1980s Colombia's fundamentals were not significantly different from those of the Latin American countries that defaulted on their debts. We also document that the different path chosen by Colombia was due to the authorities' belief that maintaining a good reputation in the international capital market would have substantial long-term payoffs. We show that the case of Colombia is more complex than what it is commonly assumed. Although Colombia had to re-profile its debts, high-level political support from the US allowed Colombia do to so outside the standard framework of an IMF program. Our counterfactual analysis shows that in the short to medium run, Colombia benefited from avoiding an explicit default. Specifically, we find that GDP growth in the 1980s was higher than that of a counterfactual in which Colombia behaved like its neighboring countries. We also test whether Colombia's behavior in the 1980s led to long-term reputational benefits. Using an event study based on a large sudden stop, we find no evidence for such long-lasting reputational gains.

This paper studies whether countries benefit from servicing their debts during times of widespread sovereign defaults. Colombia is typically regarded as the only large Latin American country that did not default in the 1980s. Using archival research and formal econometric estimates of Colombia's probability of default, we show that in the early 1980s Colombia's fundamentals were not significantly different from those of the Latin American countries that defaulted on their debts. We also document that the different path chosen by Colombia was due to the authorities' belief that maintaining a good reputation in the international capital market would have substantial long-term payoffs. We show that the case of Colombia is more complex than what it is commonly assumed. Although Colombia had to re-profile its debts, high-level political support from the US allowed Colombia to do so outside the standard framework of an IMF program. Our counterfactual analysis shows that in the short to medium run, Colombia benefited from avoiding an explicit default. Specifically, we find that GDP growth in the 1980s was higher than that of a counterfactual in which Colombia behaved like its neighboring countries. We also test whether Colombia's behavior in the 1980s led to long-term reputational benefits. Using an event study based on a large sudden stop, we find no evidence for such long-lasting reputational gains.

Overall mobility declined during the COVID-19 pandemic because of government lockdowns and voluntary social distancing. Yet, aggregate data mask important heterogeneous effects across segments of the population. Using unique mobility indicators based on anonymized and aggregate data provided by Vodafone for Italy, Portugal, and Spain, we find that lockdowns had a larger impact on the mobility of women and younger cohorts. Younger people also experienced a sharper drop in mobility in response to rising COVID-19 infections. Our findings, which are consistent across estimation methods and robust to a variety of tests, warn about a possible widening of gender and inter-generational inequality.

This paper studies whether countries benefit from servicing their debts during times of widespread sovereign defaults. Colombia is typically regarded as the only large Latin American country that did not default in the 1980s. Using archival research and formal econometric estimates of Colombia's probability of default, we show that in the early 1980s Colombia's fundamentals were not significantly different from those of the Latin American countries that defaulted on their debts. We also document that the different path chosen by Colombia was due to the authorities' belief that maintaining a good reputation in the international capital market would have substantial long-term payoffs. We show that the case of Colombia is more complex than what it is commonly assumed. Although Colombia had to re-profile its debts, high-level political support from the US allowed Colombia do to so outside the standard framework of an IMF program. Our counterfactual analysis shows that in the short to medium run, Colombia benefited from avoiding an explicit default. Specifically, we find that GDP growth in the 1980s was higher than that of a counterfactual in which Colombia behaved like its neighboring countries. We also test whether Colombia's behavior in the 1980s led to long-term reputational benefits. Using an event study based on a large sudden stop, we find no evidence for such long-lasting reputational gains.