Self-fulfilling crises with default and devaluation

We characterize optimal debt policy in a dynamic stochastic general equilibrium model of defaults and devaluations in which self-fulfilling crises can arise. When the government cannot commit to repay its debt and cannot commit to maintain the exchange rate, consumers’ expectations of devaluation make the safe level of government debt very low. We show that, when the debt is in the crises zone—where self-fulfilling crisis can occur—the government finds it optimal to reduce the debt to exit the zone. The lower the probability that consumers assign to devaluation, however, the greater is the number of periods that the government will choose to take to exit the crisis zone. We argue that our model can help understand events in Argentina in 2001–2002 and throw light on some aspects of the current EMU sovereign debt crisis.     

基于可流动性资产负债表的我国政府债务风险研究

政府资产是政府债务顺利偿还的基础,当政府资产低于其负债时,政府债务将面临一定风险,因此基于政府资产负债的视角,本文结合中国实际首先编制了一个简化的政府"可流动性资产"负债表,然后,分析了1998—2008年我国政府仅考虑直接债务时的政府债务风险,并且对2009—2010年的政府债务风险进行了分析。研究表明,2003—2006年因外汇储备急剧增长使我国政府债务风险总体较小且比较稳定,但因金融危机的爆发,我国政府债务风险在此期间前后的两次金融危机中都比较大,金融危机对政府债务风险的影响显著。研究还表明,积极的财政政策对短期降低政府债务风险具有明显效果,且1997年亚洲金融危机和2007年美国次贷危机对我国政府债务风险的影响具有相似性,即金融危机爆发后的几年内政府债务风险会因积极的财政政策而经历"大—小—大"的变化过程。最后,通过引入政府或有债务,分析了具有或有债务时的政府债务风险。本文认为,只要我国政府的或有债务规模不超过24万亿元人民币,则我国的政府债务风险较小。     

One crisis,two crises…the subprime crisis and the European sovereign debt problems

This article explores the link between the subprime crisis and the European sovereign debt crisis. Using a panel data approach, we estimate the impact of the different government interventions aimed at rescuing financial institutions on the significant increase of the costs of public debts as measured by the interest rate spreads with respect to Germany. We show evidence on the existence of a statistically significant link between the two crises embodied by capital injections and government guarantees. More specifically, the two types of government interventions have a negative impact on the cost of the sovereign debts under study. This empirical result can explain why the sovereign debt crisis immediately followed the subprime crisis.     

Debt Crises and Risk‐Sharing: The Role of Markets versus Sovereigns

Using a variance decomposition of shocks to gross domestic product (GDP), we quantify the role of international factor income, international transfers, and saving in achieving risk‐sharing during the recent European crisis. We focus on the subperiods 1990–2007, 2008–2009, and 2010 and consider separately the European countries hit by the sovereign debt crisis in 2010. We decompose risk‐sharing from saving into contributions from government and private saving, and show that fiscal austerity programs played an important role in hindering risk‐sharing during the sovereign debt crisis.     

可持续公共债务水平下的政府违约问题研究

现实经济中存在公共债务具有可持续性时却发生政府违约的现象,本文在政府未来收支波动具有不确定性的假设下,建立一个政府与投资者的重复博弈模型以分析这一现象,研究发现:公共债务可持续性并不能完全排除政府违约风险,在政府未来基本盈余不确定的条件下,理性投资者愿意持有的公共债务水平远低于可持续的公共债务水平,两者的差异取决于政府对未来基本盈余的控制能力.     

浅析欧债危机对中国外贸的影响及对策

欧盟是我国第一大贸易伙伴和第一大出口市场.随着欧债危机持续恶化,欧债危机已经席卷整个欧元区,由希腊蔓延至西班牙、意大利等国.在这场经济风暴中,我国对欧洲的产品出口也受到严重的影响.通过分析欧债危机的现状和原因,我们发现此次危机对我国对欧贸易的影响主要体现在欧元汇率、欧洲市场需求的萎缩和欧洲市场挤出效应等方面.欧元汇率持续下跌,给以欧元作为结算单位的中国企业带来很大的汇兑风险,许多中小企业出口利润都淹没在汇率风险中.而欧洲市场需求的萎缩和欧洲市场挤出效应使我国的对欧贸易严重受挫.我国外销企业只有及时调整产业结构、不断开拓市场和防范汇率波动风险,才能抵御欧债危机的影响.     

Real-Time Fiscal Forecasting Using Mixed-Frequency Data*

The sovereign debt crisis has increased the importance of monitoring budgetary execution. We employ real-time data using a mixed data sampling (MiDaS) methodology to demonstrate how budgetary slippages can be detected early on. We show that in spite of using real-time data, the year-end forecast errors diminish significantly when incorporating intra-annual information. Our results show the benefits of forecasting aggregates via subcomponents, in this case total government revenue and expenditure. Our methodology could significantly improve fiscal surveillance and could therefore be an important part of the European Commission's model toolkit.     

A barrier option framework for rescue package designs and bank default risks

Rescue packages adopted to stabilize the banking system are generally divided into three categories: government purchases of distressed assets, government guaranteed debt issuance programs, and direct equity capital injections. Countries afflicted by the recent financial crisis launched general programs in one or two, and even in three different categories. In this paper, we examine that the design of a government rescue package for a distressed bank depends on the expected reduction of the default risk in the bank's equity returns. We find that the bank's default risk is negatively related to distressed loan purchases, and to capital injections, but positively related to guaranteed debt issuance. We also find that the rescue package including all three categories is not guaranteed to increase stability for the rescued bank. Specifically, the combination of distressed loan purchases and capital injections is superior to the package of the three categories in addition to the solo instrument. This suggests that an effective design of a government rescue package for the financial services industry largely depends on its targets.     

Financing government investment and its implications for public capital: A small open economy perspective

Expenditure reductions played a key role in many small open economies during fiscal consolidation, with large declines in public investment. This led to a reduction in public capital stock and affected the competitiveness of these economies. After the sovereign debt crisis, the governments that consider increasing investment to replenish the public capital stock have limited fiscal space and have to avoid external imbalances. We show that using budget-neutral investment spending can generate long-term benefits of higher public capital stock while at the same time limiting negative consequences for the public finances and the trade balance. The best way of financing government investment, which preserves fiscal and trade balances, and increases welfare, is by reducing other government spending. The second-best is financing investment with value-added tax. Financing with debt worsens fiscal and trade balances, while using distortionary labour taxes reduces labour supply, increases wage costs and worsens the trade deficit in the short run.     

Sovereign debt spread and default in a model with self-fulfilling prophecies and asymmetric information

The euro area sovereign debt crisis has renewed interest in government credibility and the risk of default. Recent empirical evidence has shown that the sharp increase in government bond yields cannot be attributed entirely to changes in macroeconomic fundamentals. Contagion effects can occur, and self-fulfilling speculation may arise. In this paper, we develop a theoretical model in the spirit of the second-generation currency crisis models developed by Obstfled (1996). The model describes a strategic game between governments and private investors. Euro area countries face a trade-off as governments may either commit to and implement restrictive fiscal policies or default on debt. The commitment strategy may not be optimal if the fundamentals deteriorate. The policy maker lose part of their credibility, and governments are forced to default. In addition, we introduce uncertainty about the cost of default in the model, which is then able to account for a greater variety of equilibrium. Thus, when the evaluation of the cost of default is asymmetric, prophecies are not always realized and default does not occur. Simulations of the model then show that it offers insights, and can help to account for the situations of Greece and Italy during the sovereign debt crisis.     

Model uncertainty in Panel Vector Autoregressive models

We develop methods for Bayesian model averaging (BMA) or selection (BMS) in Panel Vector Autoregressions (PVARs). Our approach allows us to select between or average over all possible combinations of restricted PVARs where the restrictions involve interdependencies between and heterogeneities across cross-sectional units. The resulting BMA framework can find a parsimonious PVAR specification, thus dealing with overparameterization concerns. We use these methods in an application involving the euro area sovereign debt crisis and show that our methods perform better than alternatives. Our findings contradict a simple view of the sovereign debt crisis which divides the euro zone into groups of core and peripheral countries and worries about financial contagion within the latter group.     

未来25年全球政府债务展望:对经济和公共政策的影响

文章探讨了主要经济体以及全世界的长期财政前景。文章认为,如果当前的税率或政府的退休和卫生保健惠民工程没有发生变化,未来25年政府债务规模将在大多数发达经济体和许多新兴经济体中增长到危险和不可持续的水平。虽然对于主要的经济体来说,在经济增长不出现任何大的、出乎意料的负面震荡的情况下,危险区很可能还比较远,大约会发生在今后10～25年时间内,但如果允许政府债务继续增长,利率最终将上升,从而挤出生产性投资,降低经济增长率。严重的经济下滑有可能迅速推动政府债务水平上升到危险区间,并极大地增加爆发危机的可能性。因此,政策制定者现在就应该开始计划进程,将政府债务调整到可持续的轨道。当前计划中的预算削减应该延迟到2013～2015年执行,额外的预算削减措施也应该从2016年开始实行。此外,应该立刻在控制退休和医疗成本方面达成一致,认真解决这个威胁到增长的问题。     

External liabilities,domestic institutions and banking crises in developing economies

We investigate the impact of foreign equity and debt on the occurrence of banking crises in 61 lower income and middle income economies during the 1984 to 2010 period. We also focus on the effects of domestic institutions on banking crises and whether they mitigate or exacerbate the impact of the external liabilities. We find that FDI liabilities lower the probability of a crisis, while debt liabilities increase their incidence. However, institutions that lower financial or political risk partially offset the impact of debt liabilities, as does government stability. A decrease in investment risk directly reduces the incidence of banking crises.     

Political uncertainty and corporate debt financing: empirical evidence from China

We examine the influence of political uncertainty on corporate debt financing under the Chinese highly specialized political system. A new reasonable and effective alternative indicator, official turnover reason, is constructed to measure different political uncertainty level. Robust results suggest that listed companies will keep low debt financing level and smooth debt financing volatility under political uncertainty, which will be weakened during the global financial crisis. We also find that the listed company will raise equity financing level while overall financing is significantly reduced. In addition, SOEs are more sensitive to political uncertainty than non-SOEs, as they have stronger political connections with government officials.     

Cross-country fiscal policy spillovers and capital-skill complementarity in integrated capital markets

The 2010 European sovereign debt crisis has renewed discussions on fiscal policy coordination. One rationale for coordination is fiscal policy cross-country spillovers. A common finding in the literature is that spillovers tend to be small in normal circumstances but can be large if monetary policy is at the zero lower bound. Orthogonal to the existing literature, we document a novel channel that generates cross-country spillovers over the medium run. We assume perfect capital markets integration and find that capital-skill complementarity can lead to large spillovers without the zero lower bound nor a large import share in government expenditures. As capital markets have become increasingly integrated in the Eurozone, the current degree of fiscal policy coordination between its members, low, may be insufficient. We also find that the smoothing benefits from a temporary rise in public debt spill over to other countries.     

Explaining European Union Citizens’ Trust in the European Central Bank in Normal and Crisis Times

We study the determinants of trust in the European Central Bank (ECB) as measured by the European Commission's Eurobarometer survey, in particular during the global financial crisis and the European sovereign debt crisis. We find that the fall in trust in the ECB in crisis times can be rather well explained based on the pre‐crisis determinants. We also show that the fall in trust reflected the macroeconomic deterioration, a more generalized fall in the trust in European institutions in the wake of the crisis, and the severity of the banking sector's problems, to which the ECB was associated in the public opinion.     

Sovereign bond market dependencies and crisis transmission around the eurozone debt crisis: a dynamic copula approach

We examine the dependency between the European government bond markets around the recent sovereign debt crisis. A dynamic copula approach is used to model the time-varying dependence structure of those government bond markets, evaluate the nature and strength of their dependencies over time, and gauge the transmission of the crisis shocks. Our results can be summarized as follows: i) the eurozone sovereign bond markets under consideration have a significant and positive dependence with the Greek and the EMU benchmark sovereign bond markets; ii) the dynamic-BB7 copula function best describes the dependence structure between these sovereign bond markets and provides evidence of asymmetric tail dependence; iii) the conditional probability of crisis transmission from Greece to other eurozone countries is higher than the other way around; and iv) Greece is the most vulnerable country when the eurozone entered into the sovereign debt crisis.     

地方政府债务理论： 国内外研究比较与国内研究展望

国外地方政府债务的研究伴随着财政联邦主义理论的出现而开始受到学者关注，无论在研究内容，还是在研究方法上，都形成了系统的体系和严密的逻辑。国内地方政府债务研究从21世纪初开始进入学者的视野，并在美国金融危机和欧洲债务危机爆发后成为理论界的热点研究领域。与国外研究相比，国内研究尚未建立起或运用鲜明的逻辑，研究的深度还需加强，研究方法也存在较大差距。基于国内研究的不足与差距，本文提出了国内地方政府债务研究展望，包括债务形成与发展的动态考察，债务规模决定因素的定量研究，债务可持续性分析与融资平台研究，债务管理的制度安排与体系设计。     

Game theory and speculation on government bonds

The aim of this paper is to propose a method to stabilize the rapid variations on the value of government bonds issued by the States, using Game Theory. In particular, we focus our attention on three players: a large speculative bank (hereinafter called Speculator), having immediate access to the market of government bonds, the European Central Bank (ECB) and a State in economic crisis, with a high public debt. In this regard, we will analyze the interaction between these three subjects: the Speculator, our first player, the ECB, our second player, and the State, our third player. The financial crisis, that hit the market of European government bonds, showed us that large speculators can influence the financial markets and benefit from the creation of arbitrage opportunities caused by themselves. In this way, the default probability of States in economic difficulty increases significantly and alarmingly. We already heard to talk about concepts like “spread” and “public debt,” which has crippled the economies of great States, for instance Italy. In this paper we propose on financial transactions the introduction of a tax, which hits only the speculative profits. We show how the above tax would probably be able to avert the speculation. For this purpose, we compare the different behaviors adopted by the Speculator and by the ECB in case of absence or presence of the tax, with the consequent effects on the State that sells its government bonds, paying particular attention to the movement of the game equilibria. In fact, with the introduction of our tax, all equilibria of the game become excellent for the State in economic difficulty.     

Fiscal transparency,government effectiveness and government spending efficiency: Some international evidence based on panel data approach

The global financial crisis and the debt crisis of the EU countries revealed serious weaknesses in fiscal reporting. As a consequence, uncertainties regarding the real situation of the public accounts of the countries raised doubts in relation to the effectiveness of government policies. Since then, countries are undertaking reforms in order to improve fiscal transparency. This paper analyzes whether countries are making efforts to enhance fiscal transparency, and whether fiscal transparency affects government effectiveness and government spending efficiency. We consider two channels through which this effect occurs. The first channel is indirect and it works through public debt. The second channel is the direct effect that transparency has on government effectiveness and government spending efficiency once transparency enhances accountability and thus the task of resource allocation. We use a sample of 82 countries (68 developing and 14 developed) for the period 2006–2014, and panel data analysis. Comparing the scores of fiscal transparency between 2006 and 2014, we observe that approximately 80 per cent of the countries made efforts to improve fiscal transparency. The results suggest fiscal transparency is important to reduce public debt and to improve government effectiveness and government spending efficiency.