Anna Gibert
I build a model where creditworthy countries use fiscal austerity to communicate their ability to repay sovereign debt. I show that the signalling channel is active only for high levels of asymmetric information. The model generates ceteris paribus a negative association between the amount of public information (provided by the rating agencies) and fiscal tightness. Informed by the model predictions, I run panel data regressions on 58 OECD and emerging market economies since 1980 and find evidence of the signalling channel.
Themen: Öffentliche Finanzen
JEL-Classification: C32
Keywords: signalling, fiscal austerity, sovereign debt, credit ratings
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