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We find that countries which are able to borrow at spreads that seem low given fundamentals (for example because investors take a bullish view on a country's future), are more likely to develop economic difficulties later on. We obtain this result through a two-stage procedure, where a first regression links sovereign spreads to fundamentals, after which residuals from this regression are deployed in a second stage to assess their impact on future outcomes (real GDP growth and the occurrence of fiscal crises). We confirm the relevance of past sovereign debt mispricing in several out-of-sample exercises, where they reduce the RMSE of real GDP growth forecasts by as much as 15 percent. This provides strong support for theories of sentiment affecting the business cycle. Our findings also suggest that countries shouldn't solely rely on spread levels when determining their fiscal strategy; underlying fundamentals should inform policy as well, since historical relationships between spreads and fundamentals often continue to apply in the medium-to-long run.

Argentina --- Exports and Imports --- Macroeconomics --- Public Finance --- Forecasting --- Business Fluctuations --- Cycles --- Prices, Business Fluctuations, and Cycles: Forecasting and Simulation --- Fiscal Policy --- International Lending and Debt Problems --- Debt --- Debt Management --- Sovereign Debt --- Current Account Adjustment --- Short-term Capital Movements --- Macroeconomics: Consumption --- Saving --- Wealth --- Forecasting and Other Model Applications --- International economics --- Public finance & taxation --- Economic Forecasting --- Public debt --- Current account deficits --- External debt --- Government consumption --- Economic forecasting --- Balance of payments --- National accounts --- Debts, Public --- Debts, External --- Consumption --- Economics

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Individual countries of the Maghreb have achieved substantial progress on trade, but, as a region they remain the least integrated in the world. The share of intraregional trade is less than 5 percent of their total trade, substantially lower than in all other regional trading blocs around the world. Geopolitical considerations and restrictive economic policies have stifled regional integration. Economic policies have been guided by country-level considerations, with little attention to the region, and are not coordinated. Restrictions on trade and capital flows remain substantial and constrain regional integration for the private sector.

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