Veranstaltungen des DIW Berlin/
Events of DIW Berlin

20 January 2016

DIW Seminar on Macroeconomics and Econometrics Does Austerity Pay Off?

We investigate whether a reduction of government consumption lowers the sovereign default premium. For this purpose we build a new data set for 38 emerging and developed economies. Results vary along three dimensions. First, the time horizon: the premium declines, but only in the long run. Second, initial conditions: the premium increases in the short run, but only if it is already high. Third, size: the short-run response of the premium increases disproportionately in the reduction of government consumption. We rationalize these findings in a model of optimal sovereign default where default risk is priced in an actuarially fair manner.

More Information
Speaker
  • Johannes Pfeifer, University of Mannheim

  • Time
    12:00 - 13:15
    Location
    DIW Berlin (Gustav-Schmoller-Raum) DIW Berlin im Quartier 110 Room 3.3.002A Mohrenstraße 58 10117 Berlin
    Contact(s)
    at DIW Berlin
    Tel.: +49 30 89789 420
    Tel.: +49 30 89789 492