We formalize sovereign and private sector default probabilities into a monetary model in order to test the hypothesis, which recently appeared in the literature, of whether the consideration of a sovereign risk channel affects the sign and size of output fiscal multipliers. The model is estimated for the most vulnerable Eurozone countries-characterized by high debt-to-GDP ratio-and stochastically simulated conditional on expenditure and revenue policy measures. We show that, conditional on specific fiscal shocks, the risk channel can operate in a pro-cyclical direction, amplifying the temporary contractionary effects of fiscal retrenchments. We show that both the relations between economic fundamentals and sovereign debt spreads and that between sovereign and credit spreads are weak. Therefore, the effectiveness of the risk channel for fiscal consolidations is small, irrespective of the direction of change in the sovereign default probability.

中文翻译：

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高负债国家财政紧缩与主权风险渠道传导机制


我们将主权和私营部门违约概率形式化为货币模型，以检验最近出现在文献中的假设，即考虑主权风险渠道是否会影响产出财政乘数的符号和大小。该模型针对最脆弱的欧元区国家（其特点是债务与国内生产总值的比率较高）进行了估计，并以支出和收入政策措施为条件进行了随机模拟。我们表明，在特定的财政冲击的条件下，风险渠道可以顺周期方向运作，放大财政紧缩的暂时紧缩效应。我们的研究表明，经济基本面与主权债务利差之间以及主权与信用利差之间的关系都很弱。因此，无论主权违约概率的变化方向如何，财政整顿风险渠道的有效性都很小。