Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/318155 
Year of Publication: 
2019
Series/Report no.: 
BCAM Working Paper No. 1902
Publisher: 
Birkbeck, University of London, Birkbeck Centre for Applied Macroeconomics (BCAM), London
Abstract: 
We develop a class of dynamic stochastic general equilibrium models with nominal rigidities and we introduce default risk in the model. We find that if productivity changes are observed, policy authorities should be aware of default risk, although being aware of such risk is not very important following government expenditure changes. Welfare gains from awareness of default risk are nonnegligible if productivity changes, although welfare gains from awareness of default risk are tiny following government expenditure changes.
Subjects: 
Sovereign Risk
Optimal Monetary Policy
Fiscal Theory of the Price Level
JEL: 
E52
E60
Document Type: 
Working Paper

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