{"id":7156,"date":"2017-04-20T09:44:15","date_gmt":"2017-04-20T07:44:15","guid":{"rendered":"https:\/\/www.rrz.sk\/sovereign-default-risk-and-debt-limits-case-of-slovakia\/"},"modified":"2022-03-03T10:02:19","modified_gmt":"2022-03-03T09:02:19","slug":"sovereign-default-risk-and-debt-limits-case-of-slovakia","status":"publish","type":"post","link":"https:\/\/www.rrz.sk\/en\/sovereign-default-risk-and-debt-limits-case-of-slovakia\/","title":{"rendered":"Sovereign Default Risk and Debt Limits: Case of Slovakia"},"content":{"rendered":"<div id=\"pl-7156\"  class=\"panel-layout\" ><div id=\"pg-7156-0\"  class=\"panel-grid panel-no-style\" ><div id=\"pgc-7156-0-0\"  class=\"panel-grid-cell\" ><div id=\"panel-7156-0-0-0\" class=\"so-panel widget widget_sow-editor panel-first-child panel-last-child\" data-index=\"0\" ><div\n\t\t\t\n\t\t\tclass=\"so-widget-sow-editor so-widget-sow-editor-base\"\n\t\t\t\n\t\t>\n<div class=\"siteorigin-widget-tinymce textwidget\">\n\t<p>\tIt can be shown, that for a benevolent government issuing long-term debt it is welfare-enhancing to introduce credible fiscal rules to mitigate the so called \"debt dilution\" problem. By calibrating the theoretical model to Slovak data, we estimate the optimal (net) debt brake threshold at 48 percent of the mean annual output. Compared to a norule economy, the introduction of a fully-credible debt limit represents a substantial decrease in average sovereign spreads (50 basis points). In the empirical part of the paper we find that the introduction of the constitutional Fiscal Responsibility Act in Slovakia in 2011 might have helped to lower sovereign spreads compared to euro area peers by 20-30 basis points.<\/p>\n<p>Keywords: sovereign default risk, debt dilution, fiscal rules, debt limits<\/p>\n<p>JEL Classification: H1, H63, H8<\/p>\n<\/div>\n<\/div><\/div><\/div><\/div><\/div>","protected":false},"excerpt":{"rendered":"<p>We use a sovereign default model developed by Hatchondo et al. (2015) to study the implications of adopting constitutional debt limits. <\/p>\n","protected":false},"author":6,"featured_media":12434,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"h5ap_radio_sources":[],"footnotes":""},"categories":[132,135,158],"tags":[84,69],"class_list":["post-7156","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-debt","category-fiscal","category-publications","tag-studies","tag-working-papers-en"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Sovereign Default Risk and Debt Limits: Case of Slovakia - Rada pre rozpo\u010dtov\u00fa zodpovednos\u0165<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.rrz.sk\/en\/sovereign-default-risk-and-debt-limits-case-of-slovakia\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sovereign Default Risk and Debt Limits: Case of Slovakia - Rada pre rozpo\u010dtov\u00fa zodpovednos\u0165\" \/>\n<meta property=\"og:description\" content=\"We use a sovereign default model developed by Hatchondo et al. (2015) to study the implications of adopting constitutional debt limits.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.rrz.sk\/en\/sovereign-default-risk-and-debt-limits-case-of-slovakia\/\" \/>\n<meta property=\"og:site_name\" content=\"Rada pre rozpo\u010dtov\u00fa zodpovednos\u0165\" \/>\n<meta property=\"article:published_time\" content=\"2017-04-20T07:44:15+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-03-03T09:02:19+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.rrz.sk\/wp-content\/uploads\/2017\/04\/Depositphotos_55208119_DS.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2048\" \/>\n\t<meta property=\"og:image:height\" content=\"1154\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"\u017dofia\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"\u017dofia\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.rrz.sk\/en\/sovereign-default-risk-and-debt-limits-case-of-slovakia\/\",\"url\":\"https:\/\/www.rrz.sk\/en\/sovereign-default-risk-and-debt-limits-case-of-slovakia\/\",\"name\":\"Sovereign Default Risk and Debt Limits: Case of Slovakia - 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