Revisiting the fiscal theory of sovereign risk from a DSGE viewpoint

IF 5.4 2区经济学 Q1 BUSINESS, FINANCE

Journal of International Financial Markets Institutions & Money Pub Date : 2024-01-28 DOI:10.1016/j.intfin.2024.101953

Eiji Okano , Kazuyuki Inagaki , Masataka Eguchi

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Abstract

In this study, we revisit Uribe’s (2006) “fiscal theory of sovereign risk”, which suggests a trade-off between stabilizing inflation and suppressing default. Unlike Uribe (2006), we develop a class of dynamic stochastic general equilibrium models in which the production is endogenous with nominal rigidities but whereby the default mechanism follows Uribe (2006). This marginal change generates the New Keynesian Phillips curve that connects inflation and the output gap. Under the optimal monetary and fiscal (OMF) policy, the nominal interest rate and tax rate are both used as policy instruments. A change in the tax rate stabilizes inflation by stabilizing the output gap. Furthermore, this change in the tax rate stabilizes fiscal surplus. Therefore, a trade-off between stabilizing inflation and suppressing default is mitigated by the OMF policy. Note that the OMF policy is a de facto inflation stabilization policy; thus, the tax rate is viewed as a policy instrument for stabilizing inflation.

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从 DSGE 的角度重新审视主权风险的财政理论

在本研究中，我们重新审视了 Uribe（2006 年）的 "主权风险财政理论"，该理论提出了在稳定通胀和抑制违约之间的权衡。与 Uribe（2006）不同的是，我们建立了一类动态随机一般均衡模型，其中生产是内生的，具有名义刚性，但违约机制遵循 Uribe（2006）。这种边际变化产生了连接通货膨胀和产出缺口的新凯恩斯主义菲利普斯曲线。在最优货币和财政（OMF）政策下，名义利率和税率都被用作政策工具。税率的变化通过稳定产出缺口来稳定通货膨胀。此外，税率的变化还能稳定财政盈余。因此，在稳定通胀和抑制违约之间的权衡可以通过其他货币基金政策来缓解。请注意，货币基金政策是一种事实上的稳定通胀政策；因此，税率被视为稳定通胀的政策工具。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of International Financial Markets Institutions & Money Multiple-

CiteScore

6.60

自引率

10.00%

发文量

142

期刊介绍： International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.