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We estimate the pricing of sovereign risk for sixty countries based on fiscal space (debt/tax; deficits/tax) and other economic fundamentals over 2005-10. We measure how accurately the model predicts sovereign credit default swap (CDS) spreads, focusing in particular on the five countries in the South-West Eurozone Periphery (Greece, Ireland, Italy, Portugal, and Spain). Dynamic panel estimates of the model suggest that fiscal space and other macroeconomic factors are statistically significant and economically important determinants of market-based sovereign risk. Although the explanatory power of fiscal space measures drop during the crisis, the TED spread, trade openness, external debt and inflation play a larger role. As expectations of market volatility jumped during the crisis, the weakly concavity of creditors' payoff probably accounts for the emergence of TED spread as a key pricing factor. However, risk-pricing of the SouthWest Eurozone Periphery countries is not predicted accurately by the model either in-sample or out-of-sample: unpredicted high spreads are evident during global crisis period, especially in 2010 when the sovereign debt crisis swept over the periphery area. We "match" the periphery group with five middle income countries outside Europe that were closest in terms of fiscal space during the European fiscal crisis. We find that Eurozone periphery default risk is priced much higher than the "matched" countries in 2010, even allowing for differences in fundamentals. One interpretation is that the market has mispriced risk in the Eurozone periphery. An alternative interpretation is that the market is pricing not on current fundamentals but future fundamentals, expecting the periphery fiscal space to deteriorate markedly and posing a high risk of debt restructuring. Adjustment challenges of the Eurozone periphery may be perceived as economically and politically more difficult than the matched group of middle income countries because of exchange rate and monetary constraints.Keywords: CDS spreads, sovereign risk, fiscal space, default risk, Eurozone JEL: E43, F30, G01, H63 *We thank seminar participants at the Bank for International Settlements, Danmarks Nationalbank, the Bank of Canada, Columbia-Tsinghua international economics workshop, Chulalongkorn University (Sasin), and Association for Public Economic Theory 2011 Conference for very helpful comments. This paper investigates the pricing of risk associated with the sovereign debt crisis that escalated during 2010 in several European countries. Our objective is to determine whether the perception of relatively high sovereign default risk of the fiscally distressed Euro area countries, as seen in market pricing of credit default swap (CDS) spreads, may be explained by existing past or current fundamentals of debt and deficits relative to tax revenues -which we term de facto fiscal space -and other economic determinants. 2 Our analysis allows us to address several questions. Does fiscal space help systematically explain the evolution o...

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Superplastic extension of the aluminium-zinc eutectoid results·primarily from grain-boundary sliding and grain rotation. The strain rate (e:), flow stress (0), grain size (L), and temperature (T) are related empirically:.where K is a constant, k is Boltzmann's constant, and U correlates with the activation energy for grainboundary diffusion.The following proposed mechanism is quantitatively in agreement with our observations on superplasticity:(i) Certain grains that obstruct the easy relative motion of groups of grains by grain-boundary sliding yield under the resulting stress concentration; (ii) under superplastic conditions, dislocations traverse such yielded grains and pile up at grain boundaries until their back stress prevents the grain-boundary sliding; (iii) the high stress at the head of the pile-up causes accelerated diffusion and dislocations rapidly escape by climb into and along grain boundaries. The replacement of these dislocations makes possible further boundary sliding by the obstructed group of grains.The superplastic behaviour of many alloys1 is of considerable interest because of the extremely large deformations that occur at quite high rates of strain, but neither the mode nor the mechanism of superplastic flow has been established. Superplasticity is most evident in eutectic or eutectoid alloys. However, the marked superplasticity of the quenched aluminium-zinc eutectoid suggests that the structural metastability of such alloys is not the cause of superplasticity; this alloy decomposes spontaneously at room temperature 2 ,3 and separation of the phases would normally occur before testing. The high strain-rate-sensitivity of the flow stress during superplastic deformation led to the proposal 4 that the flow occurred by a combination of Herring-Nabarro creep and dislocation motion. At high temperatures and low strain rates the Herring-Nabarro n1echanism would be dominant and m would approach unity in the equation cr = CXgm, where cr is the stress, g the strain rate, and cx is a constant. However, the maximum observed values of m, at temperatures just below the eutectic or eutectoid temperatures, consistently approach 0.5. 5 -7 In addition, calculations 6 ,8 show that the maximum possible strain rate by pure HerringPaper No. MS 103. Manuscript Nabarro creep (nl = 1),either through bulk or grain-boundary diffusion, is far below those experimentally recorded.The observation 9 that grains of lead-tin and lead-bismuth alloys remained equiaxed during extensions of ,...., 2000% led to the conclusion that grain-boundary sliding was the important mode of deformation. This view is supported by recent metallographic investigations of superplasticity.5,10 Despite this evidence, Chaudhari ll has,recent1y proposed that deformation proceeds solely by dislocation movement within the grains; his mechanism does not explain how the grains can remain equiaxed, and his proposal consequently appears unreasonable.The present work attempts to correlate the microstructure, as observed by electron microscopy: with th...

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractLegal restrictions on international capital movements are imposed in many countries in an attempt to (partially) insulate their economies from abroad and pursue some degree of domestic policy independence. But is the imposition of capital controls effective in achieving these goals? We investigate this issue from a new angle by linking de jure restrictions on three specific asset categories of outflows and inflows with the corresponding component of capital flows. The analysis is based on a novel panel data set of capital controls data, disaggregated by asset class and by inflows/outflows, and covering 74 countries during 1995-2005. Using panel LSDV regressions, and including a host of well-known determinants of capital flows, we estimate a model of capital flows with four categories: equity-like flows (including FDI) and debt for both capital inflows and capital outflows. The estimated effects of capital controls vary markedly with the type of controls imposed: they are binding on capital outflows (debt, equity and FDI); have no apparent effect on capital inflows of various types; and are less effective in low and middle-income countries. Moreover, there are no apparent substitution effects so that controls on debt and equity outflows change the volume and composition of capital flows as well as the net flow of capital in each asset class. The large differences across asset categories in the effects of capital controls suggest that the common use of aggregate capital control indicators can be misleading.JEL Classification: F21; F32; F36

New indices of fiscal rule strength are constructed and, using a dynamic panel econometric model for 27 EU countries over the period 1990-2012, we assess whether national fiscal rules alone help to promote sustainable public finances in the EU or whether they must be supported by good governance in order to be effective. We find that fiscal rules are effective in reducing structural primary deficits at all levels of government efficiency. However, the effect is smaller as government efficiency increases, indicating that fiscal rules and government efficiency are institutional substitutes in terms of promoting fiscal sustainability. We also find that balanced budget rules are the most effective form of fiscal rules. Multiple fiscal rules are found to enhance fiscal solvency. Other institutional features that enhance the effectiveness of fiscal rules are transparency of policies and commitment to implementation of fiscal programs. Supranational rules, however, do not affect the effectiveness of national fiscal rules in reducing the deficit bias. Our results are robust to alternative estimation methods and endogeneity assumptions.

No abstract