Sovereign Indebtedness and Financial and Fiscal Conditions

REM Working Paper 111-2019

10 Pages Posted: 9 Jan 2020

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa; REM - Research in Economics and Mathematics

João Tovar Jalles

University of Lisbon; International Monetary Fund (IMF); Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE)

Date Written: December 15, 2019

Abstract

We empirically assess the magnitudes of sovereign indebtedness responses for a sample of 123 Advanced and Emerging Market Economies, between 1980 and 2018, taking into account the changing characteristics of financial markets, notably the Global and Financial Crisis. Our results show that when the financial conditions are more stressful, for instance, higher yield spreads or a heightened degree of financial stress, fiscal authorities use more actively their primary balance to reduce sovereign indebtedness, which is not the case when financial market conditions are more benign. This is notably true for the case of Emerging Market Economies sovereigns, who most likely then struggle more to fund themselves.

Keywords: sovereign indebtedness, panel data, financial stress, global financial crisis, emerging markets

JEL Classification: C23, G15, H63

Suggested Citation

Afonso, António and Jalles, João Tovar, Sovereign Indebtedness and Financial and Fiscal Conditions (December 15, 2019). REM Working Paper 111-2019, Available at SSRN: https://ssrn.com/abstract=3504335 or http://dx.doi.org/10.2139/ssrn.3504335

António Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://www.iseg.ulisboa.pt/aquila/homepage/aafonso/research

UECE (Research Unit on Complexity and Economics)

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://rem.rc.iseg.ulisboa.pt/

João Tovar Jalles

University of Lisbon ( email )

R. Branca Edmée Marques
Dept. Plant Biology
Lisboa, 1600-276
Portugal

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE)

Rua Miguel Lupi, 20
Lisboa, 1200-781
Portugal

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