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We would like to thank Ravi Balakrishnan, Marcos Chamon, Roberto Perrelli, Samuel Pienknagura, Jorge Roldos, Frederik Toscani, Susan Yang, and participants at seminars at the Central Bank of Colombia and at the IMF for helpful comments. Pablo Bejar and Genevieve Lindow provided excellent research assistance. The usual disclaimer applies.
Guajardo, Leigh, and Pescatori (2014), for instance, find that in a panel of advanced economies that consolidations in economies with high-perceived sovereign risk are less contractionary. There is also indicative evidence to that effect in the sample of EMDEs analyzed in Carrière-Swallow, David, and Leigh (2018).
We also look at the responses of countries with low sovereign spreads, below the 25th percentile of the sample distribution, and the effects of announcements on spreads are not significant for all branches of government. The results are not shown, but are available upon request.
It is important to note that in our sample, only 4 countries (Chile, India, Slovak Republic, and South Africa) did not have a program supported by the IMF between 2000 and 2018.
With the exception of Jamaica where we use a monthly interpolation of the quarterly GDP series.
This approach is similar to the methodology used, for example, by Bernanke et al. (1998), Sims and Zha (2006), and Kilian and Lewis (2011) to understand the role of the systematic component of monetary policy in the transmission of shocks.
This representation also requires augmenting both the
Bootstrapping for the panel was done by generating initial conditions separately for each country as in Runkle (1987), but sampling from the entire panel vector of residuals. This was done to account for possible cross-country correlations.
We analyzed also the response to the announcements from the executive, but results are not significant and the difference between the baseline and counterfactual scenarios is negligible. Results are available from the authors upon request.