Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237488 
Year of Publication: 
2021
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1207
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
This paper studies the effect of implementing fiscal rules on sovereign default risk and on the probability of large capital ow reversals for a large sample of countries including both developed and emerging market economies. Results indicate that fiscal rules are beneficial for macroeconomic stability, as they significantly reduce both sovereign risk perception and the probability of a sudden stop in countries that implement them. These results, which are robust to various empirical specifications, have important policy implications specially for countries that have relaxed their fiscal rules in response to the Covid-19 pandemic.
Subjects: 
fiscal rules
sovereign default risk
sudden stops
dynamic heterogeneous panel data models
JEL: 
C33
F34
G15
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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