Sovereign default risk,debt uncertainty and fiscal credibility: The case of Brazil

Since Credit Default Swaps spreads reflect the sovereign risk and, thus, the uncertainties related to government solvency, the goal of this study is to examine the relation between sovereign risk and debt uncertainty (measured by the disagreement in expectations about public debt) in an important developing country – Brazil. Furthermore, the paper analyzes whether fiscal credibility plays a key role in mitigating the effect of debt uncertainty on sovereign risk. The results suggest the disagreement in expectations about public debt affects the sovereign risk, and fiscal credibility plays a twofold role, it reduces sovereign risk, and it mitigates the effect of debt uncertainty on sovereign risk. Besides, quantile regression estimates reveal that fiscal credibility improvements are even more important when sovereign risk levels are higher.     

Great recession,slow recovery and muted fiscal policies in the US

This paper reconsiders the role of macroeconomic shocks and policies in determining the Great Recession and the subsequent recovery in the US. The Great Recession was mainly caused by a large demand shock and by the ZLB on the interest rate policy. In contrast with previous findings, the subsequent jobless recovery is explained by the ZLB effect. We estimate a fraction of Non-Ricardian households which is close to 50%, and obtain comparatively large fiscal multipliers. However we cannot detect a significant contribution of fiscal policies in stabilizing the US economy. For instance, the 2007–2009 large increase in expenditure-to-GDP ratios was apparently determined by the adverse non-policy shocks that caused the recession.     

The impact of policy,political and economic uncertainty on corporate capital investment in the emerging markets of Eastern Europe and Turkey

This paper examines the impact of policy, political, and economic uncertainty on firm-level capital investment in Czechia, Hungary, Poland, Russia, and Turkey. Our results indicate an insignificant relationship between uncertainty and investment in these countries. This finding is robust to six different uncertainty measures, including time-series uncertainty indices that track either local or global uncertainty and country-level electoral activities. The results are also robust to two different proxies for measuring corporate investment. Overall, the real-option mechanism in which firms delay irreversible investment in uncertain times does not hold in the emerging markets of Eastern Europe and Turkey.