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This paper highlights the importance of debt composition in setting optimal fiscal and monetary policy over short-run business cycles and in the long run. Nominal debt as state-contingent debt can be a significant policy tool to reduce the volatility of distortionary government policy, thereby reducing macroeconomic volatility while increasing equilibrium output and consumption. The welfare gain from using nominal debt to hedge against shocks to the government budget is as large as the welfare gain from the ability to issue debt.

Debts, Public. --- Monetary policy. --- Fiscal policy. --- Tax policy --- Taxation --- Economic policy --- Finance, Public --- Monetary management --- Currency boards --- Money supply --- Debts, Government --- Government debts --- National debts --- Public debt --- Public debts --- Sovereign debt --- Debt --- Bonds --- Deficit financing --- Government policy --- Macroeconomics --- Money and Monetary Policy --- Public Finance --- Labor --- Financial Markets and the Macroeconomy --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Stabilization --- Treasury Policy --- Debt Management --- Sovereign Debt --- National Government Expenditures and Related Policies: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Labor Economics: General --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Demand and Supply of Labor: General --- Public finance & taxation --- Labour --- income economics --- Monetary economics --- Welfare & benefit systems --- Expenditure --- Consumption --- Currencies --- Labor taxes --- National accounts --- Taxes --- Labor supply --- Expenditures, Public --- Economics --- Labor economics --- Money --- Income tax --- Labor market --- United States

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This paper develops a comprehensive new framework to measure and analyze sovereign risk. Since traditional macroeconomic vulnerability indicators and accounting-based measures do not address risk in a comprehensive and forward-looking way, the contingent claims approach is used to construct a marked-to-market balance sheet for the sovereign, and derive a set of credit-risk indicators that serve as a barometer of sovereign risk. Applications to 12 emerging market economies show the risk indicators to be robust and highly correlated with market spreads. The framework can help policymakers design risk mitigation strategies and rank policy options using a calibrated structural model unique to each economy.

Country risk. --- Debts, External. --- Electronic books. -- local. --- Financial crises. --- Risk assessment. --- Risk management. --- Accounting --- Banks and Banking --- Budgeting --- Exports and Imports --- Financial Risk Management --- Public Administration --- Public Sector Accounting and Audits --- International Financial Markets --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- International Lending and Debt Problems --- Debt --- Debt Management --- Sovereign Debt --- Financial reporting, financial statements --- Finance --- Financial services law & regulation --- International economics --- Budgeting & financial management --- Financial statements --- Asset valuation --- Credit risk --- Foreign currency debt --- Government liabilities --- Finance, Public --- Asset-liability management --- Financial risk management --- Debts, External --- Budget --- South Africa

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We investigate the impact of remittances on public debt sustainability and detail how the traditional debt-to-GDP ratio can be modified to create a more accurate representation of debt sustainability for a country that receives significant remittance inflows. The main result is that inclusion of remittances into the traditional debt sustainability analysis alters the amount of fiscal adjustment required to place debt on a sustainable path. While preliminary, these results are indicative of how a one-size-fits-all stability analysis may be inappropriate when evaluating the stance of fiscal policy for countries with different balance of payments characteristics.

Debts, Public -- Econometric models. --- Emigrant remittances -- Econometric models. --- Fiscal policy. --- Political Science --- Law, Politics & Government --- Public Finance --- Debts, Public. --- Debts, Government --- Government debts --- National debts --- Public debt --- Public debts --- Sovereign debt --- Tax policy --- Taxation --- Government policy --- Debt --- Bonds --- Deficit financing --- Economic policy --- Finance, Public --- Banks and Banking --- Exports and Imports --- Macroeconomics --- Remittances --- Debt Management --- Sovereign Debt --- International Lending and Debt Problems --- Fiscal Policy --- Interest Rates: Determination, Term Structure, and Effects --- International economics --- Public finance & taxation --- Finance --- Debt sustainability --- Fiscal consolidation --- Real interest rates --- International finance --- Debts, Public --- Debts, External --- Fiscal policy --- Interest rates --- Lebanon

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Given the large size of aggregate remittance flows (billions of dollars annually), they should be expected to have significant macroeconomic effects on the economies that receive them. This paper directly addresses the two main issues of interest to policymakers with regard to remittances--how to manage their macroeconomic effects, and how to harness their development potential--by reporting the results of the first global study of the comprehensive macroeconomic effects of remittances on recipient economies. In broad terms, the findings of this paper tend to confirm the main benefit cited in the microeconomic literature: remittances improve households' welfare by lifting families out of poverty and insuring them against income shocks. The findings also yield a number of important caveats and policy considerations, however, that have largely been overlooked. The main challenge for policymakers in countries that receive significant flows of remittances is to design policies that promote remittances and increase their benefits while mitigating adverse side effects. Getting these policy prescriptions correct early on is imperative. Globalization and the aging of developed economy populations will ensure that demand for migrant workers remains robust for years to come. Hence, the volume of remittances likely will continue to grow, and with it, the challenge of unlocking the maximum societal benefit from these transfers.

Emigrant remittances. --- Emigration and immigration -- Economic aspects. --- Emigration and immigration. --- Exports and Imports --- Foreign Exchange --- Labor --- Macroeconomics --- Taxation --- Remittances --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Aggregate Factor Income Distribution --- Macroeconomics: Consumption --- Saving --- Wealth --- International economics --- Currency --- Foreign exchange --- Welfare & benefit systems --- Labour --- income economics --- Outward remittances --- Real exchange rates --- Income --- Consumption --- Balance of payments --- National accounts --- International finance --- Emigrant remittances --- Economics --- United States