Suchergebnisse

Recent experience taught us that advanced economies can be subject to debt crises, with tremendous impact on the economy. Such crises are -fortunately- rare events with which policy makers do not have to deal on a daily basis. They do have to incorporate sovereign risk, the probability that such a crisis occurs, in their decisions tough. The main motivation and focus of this thesis is the challenge the presence of sovereign risk brings for policy makers. Chapter 2 and Chapter 3 deal with assessing the probability of a debt crisis. Chapter 2 uses long term time series of public finances for 9 OECD countries and shows that a simulation that takes economic uncertainty and the expected response of the government to that into account can inform on future debt sustainability. Chapter 3 uses financial market data on default risk for sovereigns and banks in Europe and investigates the directional spill-overs between them. It finds that prior to the crisis bank and government bonds were substitutes, whereas they are complements now. Three channels contribute to this effect: direct holdership of government bonds by banks, implicit bail-out guarantees and effects via the state of the economy. Chapter 4 and Chapter 5 then take sovereign risk as given and ask what the presence of sovereign risk implies. In Chapter 4 the goal is to see whether a stable and unique macroeconomic solution exists under sovereign risk as a function of monetary and fiscal policy stance. In a stable and unique solution the debt level is non-explosive and the price level is determinate. The central bank and the government need to coordinate their policies in the presence of sovereign risk. A deficit target for the government makes this easier to achieve. Chapter 5 focusses on the interaction of sovereign risk and the exchange rate regime. It shows that under a flexible exchange rate regime the exchange rate depreciates as the fiscal position deteriorates. The exchange rate depreciation supports exports, which is a stabilizing effect that counteracts ...

In standard macroeconomic models, equilibrium stability and uniqueness require monetary policy to actively target inflation and fiscal policy to ensure long-run debt sustainability. We show analytically that these requirements change, and depend on the cyclicality of fiscal policy, when government debt is risky. In that case, budget deficits raise interest rates and crowd out consumption. Consequently, countercyclical fiscal policies reduce the parameter space supporting stable and unique equilibria and are feasible only if complemented with more aggressive debt consolidation and/or active monetary policy. Stability is more easily achieved, however, under procyclical fiscal policies.

In standard macroeconomic models, debt sustainability and price level determinacy are achieved when fiscal policy avoids explosive debt and monetary policy controls inflation, irrespective of the relative strengths of each policy stance. We examine how these policy requirements for equilibrium stability and determinacy change in the presence of sovereign risk. An increase in sovereign risk reduces lender's willingness to hold government debt and raises consumption and inflation. Therefore, inflation and debt dynamics are determined jointly. To ensure stable macroeconomic conditions, both the fiscal and monetary stance must shift to offset debt sustainability concerns. We find that the adoption of a deficit target helps alleviate such concerns and raises the scope for macroeconomic stability.

Conventional wisdom teaches that the output response upon a fiscal expansion is higher under fixed than floating exchange rates for a small open economy. We analyse the effects of fiscal expansions using a New Keynesian model and find that this result reverses in times of sovereign default risk. Under a float, a fiscal expansion is followed by an exchange rate depreciation, which stimulates exports; under a peg, only the adverse effects of sovereign risk on private credit conditions and consumption remain. When these adverse effects are large, we show that a transient fiscal contraction may bring about positive output responses, yet only in the short run.

This paper derives and estimates rules for fiscal policy that prescribe the optimal response to changes in unemployment and debt. We combine the reduced form model of the economy from a linear VAR with a non-linear welfare function and obtain analytic solutions for optimal policy. The variables in our reduced form model –growth, unemployment, primary surplus– have a natural rate that cannot be affected by policy. Policy can only reduce fluctuations around these natural rates. Our welfare function contains future GDP and unemployment, the relative weights of which determine the optimal response. The optimal policy rule demands an immediate and large policy response that is procyclical to growth shocks and countercyclical to unemployment shocks. This result holds true when the weight of unemployment in the welfare function is reduced to zero. The rule currently followed by policy makers responds procyclically to both growth and unemployment shocks, and does so much slower than the optimal rule, leading to significant welfare losses.

Kritiek. Jaarboek voor socialistische discussie en analyse is een academische uitgave en biedt ruimte aan artikelen van beschouwende, theoretische, historische en polemische aard over zaken die van belang zijn voor de huidige linkse beweging.In dit nummer is er aandacht voor de positie en strijd van illegale migranten en stedelijke sociale conflicten. Zo wordt het migratiebeleid in de Verenigde Staten onder de loep genomen en vergeleken met de situatie in Nederland. Vervolgens worden verschillende kraakbewegingen in Europa met elkaar vergeleken en in een breder perspectief geplaatst. Daarnaast