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Signaling Fiscal Regime Sustainability

Posted: 3 Apr 2000

See all articles by Francesco Drudi

Francesco Drudi

European Central Bank (ECB)

Alessandro Prati

International Monetary Fund (IMF) - Research Department, Deceased

Multiple version iconThere are 2 versions of this paper

Date Written: 1999

Abstract

This paper proposes a signaling model that offers a new perspective on why governments deviate from optimal tax smoothing and delay debt stabilization. In our model, dependable -but not fully credible- governments have an incentive to tighten the fiscal regime when the signaling effect on credit ratings is larger (that is, when a sufficiently large stock of debt has been accumulated).

Keywords: Fiscal Policy, Taxation, Credit, International Affairs

JEL Classification: E63, H6, F22

Suggested Citation

Drudi, Francesco and Prati, Alessandro, Signaling Fiscal Regime Sustainability (1999). Available at SSRN: https://ssrn.com/abstract=217080

Francesco Drudi

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Alessandro Prati (Contact Author)

International Monetary Fund (IMF) - Research Department, Deceased ( email )

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