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We re-assess the view that sovereigns with a history of default are charged only a small and/or short-lived premium on the interest rate warranted by observed fundamentals. Our reassessment uses a metric of such a “default premium” (DP) that is consistent with asymmetric information models and nests previous metrics, and applies it to a much broader dataset relative to earlier studies. We find a sizeable and persistent DP: in 1870-1938, it averaged 250 bps upon market re-entry, tapering to around 150 bps five years out; in 1970- 2011 the respective estimates are about 400 and 200 bps. We also find that: (i) these estimates are robust to many controls including on actual haircuts; (ii) the DP accounts for as much as 60% of the sovereign spread within five years of market re-entry; (iii) the DP rises with market exclusion spells. These findings help reconnect theory and evidence on why sovereign defaults are infrequent and earlier debt settlements are desirable.

Business. --- Country risk -- Developing countries. --- Debts, Public -- Developing countries. --- Interest rates -- Developing countries. --- Exports and Imports --- Finance: General --- Financial Risk Management --- Money and Monetary Policy --- Public Finance --- International Lending and Debt Problems --- International Financial Markets --- Debt --- Debt Management --- Sovereign Debt --- Economic History: Financial Markets and Institutions: General, International, or Comparative --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: General (includes Measurement and Data) --- Finance --- Monetary economics --- Public finance & taxation --- International economics --- Debt settlement --- Credit --- Public debt --- Emerging and frontier financial markets --- Debt default --- Asset and liability management --- Money --- Financial markets --- External debt --- Debts, Public --- Financial services industry --- Debts, External --- United States

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China’s official general government accounts do not include off-budget quasi-fiscal spending unlike the IMF’s augmented government accounts. This paper argues that the broader concept of augmented government remains relevant despite recent positive measures to separate off-budget units from the government. In fact, new avenues to finance public infrastructure, such as Special Construction Funds and Government Guided Funds, have emerged and this paper re-defines the perimeter of augmented government to include them. Finally, concrete steps for improving China’s fiscal accounts are put forward. If these steps are taken, the perimeter of general government would expand relative to official statistics but would likely be narrower than where augmented aggregates place it.

Accounting --- Macroeconomics --- Public Finance --- Statistics --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Public Enterprises --- Public-Private Enterprises --- Data Collection and Data Estimation Methodology --- Computer Programs: Other --- Fiscal Policy --- Public Administration --- Public Sector Accounting and Audits --- Public finance & taxation --- Civil service & public sector --- Econometrics & economic statistics --- Financial administration & public finance law --- Public finance accounting --- Public investment and public-private partnerships (PPP) --- Public sector --- Government finance statistics --- Fiscal law --- Fiscal accounting and reporting --- Expenditure --- Economic sectors --- Economic and financial statistics --- Fiscal policy --- Public financial management (PFM) --- Public-private sector cooperation --- Finance, Public --- Finance --- Law and legislation --- China, People's Republic of

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The accumulation of large foreign asset positions by many central banks through sustained foreign exchange (FX) intervention has raised questions about its associated fiscal costs. This paper clarifies conceptual issues regarding how to measure these costs both from an ex-post and an ex-ante (relevant for decision making) perspective, and estimates both marginal and total costs for 73 countries over the period 2002-13. We find ex-ante marginal costs for the median emerging market economy (EME) in the inter-quartile range of 2-5.5 percent per year; while ex-ante total costs (of sustaining FX positions) in the range of 0.2-0.7 percent of GDP per year for light interveners and 0.3-1.2 percent of GDP per year for heavy interveners. These estimates indicate that fiscal costs of sustained FX intervention (via expanding central bank balance sheets) are not negligible.

Foreign exchange reserves. --- Banks and banking, Central. --- Financial statements. --- Balance sheets --- Corporate financial statements --- Earnings statements --- Financial reports --- Income statements --- Operating statements --- Profit and loss statements --- Statements, Financial --- Accounting --- Bookkeeping --- Business records --- Corporation reports --- Banker's banks --- Banks, Central --- Central banking --- Central banks --- Banks and banking --- Currency reserves, Foreign --- Foreign currency reserves --- Foreign reserves (Foreign exchange reserves) --- International reserves (Foreign exchange reserves) --- Reserves, Foreign exchange --- Finance, Public --- Reserves (Accounting) --- Banks and Banking --- Central Banks and Their Policies --- Currencies --- Currency --- Exchange rate adjustments --- Exchange rates --- Finance --- Financial services --- Foreign Exchange --- Foreign exchange --- Government and the Monetary System --- Interest rate parity --- Interest rates --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomic Aspects of International Trade and Finance: General --- Monetary economics --- Monetary Systems --- Money and Monetary Policy --- Money --- Payment Systems --- Regimes --- Standards --- United States

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Policymakers have relied on a wide range of policy tools to cope with capital flow shocks. And yet, the effects and interaction of these policies remain under debate, as does the motivation for using them. In this paper, quantile local projections are used to estimate the entire distribution of future policy responses to portfolio flow shocks for 20 emerging markets and understand the variety of policy choices across the sample. To assuage endogeneity concerns, estimates rely on the fact that global capital flows are exogenous from the viewpoint of any one of these countries. The paper finds that: (i) policy responses to capital flow shocks are heterogeneous across countries, fat-tailed—“extreme” responses tend to be more elastic than “typical” responses—and asymmetric—“extreme” responses tend to be more elastic with respect to outflows than to inflows; (ii) country characteristics are linked to policy choices—with cross-country differences in forex intervention relating to the size of balance sheet vulnerabilities and the depth of the forex market; (iii) the use of targeted macroprudential policy and capital flows management measures can help “free the hands” of monetary policy by allowing it to focus more squarely on domestic cyclical developments.

Peru --- Banks and Banking --- Exports and Imports --- Foreign Exchange --- Current Account Adjustment --- Short-term Capital Movements --- Monetary Policy --- Financial Institutions and Services: Government Policy and Regulation --- International Investment --- Long-term Capital Movements --- Interest Rates: Determination, Term Structure, and Effects --- Currency --- Foreign exchange --- International economics --- Banking --- Exchange rates --- Capital flows --- Exchange rate adjustments --- Central bank policy rate --- Balance of payments --- Financial services --- Capital movements --- Interest rates

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We quantify the effect of mask mandates in the United States. Our regression discontinuity design exploits county-level variation in COVID-19 cases, hospital admissions, and deaths across the border between states with and without mandates. We find a significant and substantial effect—mask mandates reduced new weekly COVID-19 cases, hospital admissions, and deaths by 55, 11 and 0.7 per 100,000 inhabitants on average. Crucially, we find that the effect of mask mandates depends on the attitudes toward mask wearing at the county level, with larger effects in counties more positively inclined towards mask wearing. Our results imply that mandates saved 87,000 lives through December 19, 2020, while a nationwide mandate could have saved 58,000 additional lives. These large effects suggest that mask mandates are a crucial tool to counter pandemics, particularly if accepted widely by the population. Our results are thus also relevant for countries who will not be able to immunize large swaths of their population in the short term.

Macroeconomics --- Economics: General --- Diseases: Contagious --- Demography --- Health Behavior --- Health: General --- Demographic Economics: General --- Economic & financial crises & disasters --- Economics of specific sectors --- Infectious & contagious diseases --- Health economics --- Population & demography --- COVID-19 --- Health --- Population and demographics --- Currency crises --- Informal sector --- Economics --- Communicable diseases --- Population --- United States