‘Reserve asset competition’ explains global fiscal cycle – paper
Local fiscal shocks can trigger debt issuance abroad, authors find
New research finds that countries competing to issue attractive reserve assets can help explain joint movements in fiscal policy.
In their working paper for the National Bureau of Economic Research, Zhengyang Jiang and Robert Richmond note two existing explanations for the “global fiscal cycle”.
The first is that “flight-to-safety episodes” tend to increase demand for government debt. Such episodes offer favourable financing conditions to many governments at once.
The second is the global business
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