Agenda

08 Mag 2024 12:15

Jean-Paul Renne - Fiscal fatigue and sovereign credit spreads

Meeting Room 1, San Giobbe Economics Campus + online

Jean-Paul Renne (University of Lausanne)

Abstract
We develop a dynamic sovereign credit risk model using the concept of fiscal fatigue, according to which stabilizing high debt levels requires unsustainable large surpluses, leading ultimately to credit risk. We define the fiscal limit as the debt level associated with a specific default probability at a given time. Exploiting the information encoded in sovereign credit spreads, we estimate time-varying fiscal limits and fiscal spaces (the gap between these limits and actual debts) for four advanced economies from 2007 to 2022. Fiscal spaces correlate negatively with economic policy uncertainty and bond market volatility, but positively with central bank balance sheet size.

The seminar can be attended also remotely, connecting to ZOOM.
Link Zoom: bit.ly/InseminarsDEC
ID riunione: 833 1615 8636
Passcode: In-Sem23

Lingua

L'evento si terrà in inglese

Organizzatore

Department of Economics (InSeminars)

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