Pekarski, S., Sokolova A. Default Costs and Self-fulfilling Fiscal Limits in a Small Open Economy, WP BRP 243/EC/2021
Abstract: We revisit the link between the risk of sovereign default and default costs. Higher costs of default may result in higher default probabilities, lower bond prices, and fiscal limits that are not pinned down by economic fundamentals. The feedback between private investment and government debt sustainability can result in multiple equilibria. In `bad' equilibria, investors expect default and low capital returns; low investment tightens future fiscal constraints and reduces the probability of debt repayment, validating investor pessimism. In `good' equilibria, optimistic investors choose higher capital; this results in higher fiscal surpluses, raises probability of debt repayment and validates investor optimism.
old WP version
Abstract: This paper considers 1244 estimates of marginal propensities to consume (MPC) out of stimulus checks and other small transitory or predictable payments. I use meta-regressions to uncover the sources of systematic variation in estimates. An increase in unemployment by one percentage point is associated with MPC that is higher by 4-5 percentage points. MPC estimates decrease with the size of the payments. MPCs are lower for households holding ample liquidity. MPCs out of stimulus checks are higher than those out of some recurring payments. These results highlight the importance of considering state-dependent multipliers, liquidity constraints, near rationality, and mental accounting.
Balima, H.W., Sokolova A. IMF Programs and Economic Growth: a Meta-Analysis. Journal of Development Economics, Vol. 153, November 2021, 102741 available here
Sokolova, A., Sorensen, T. Monopsony in Labor Markets: A Meta-Analysis. ILR Review. 2021; 74(1):27-55 available here
Havranek T., Sokolova A. 2020 Do Consumers Really Follow a Rule of Thumb? Three Thousand Estimates from 144 Studies Say ‘Probably Not’ Review of Economic Dynamics, Volume 35, Pages 97-122, paper, data & code
Havranek T., Rusnák M. , Sokolova A. 2017 Habit formation in consumption: A meta-analysis. European Economic Review. 2017. Vol. 95. No. June 2017. P. 142-167 available here data & code
Sokolova A. 2015 Fiscal Limits and Monetary Policy: Default vs. Inflation. Economic Modelling. Vol. 48. P. 189-198. available here
Sokolova A. 2014. Are inflation expectations in Russia forward-looking? International Journal of Computational Economics and Econometrics. Vol. 4. No. 1/2. P. 254 -268.available here