arbiter
JournalsPricingAccount

Output Gap Uncertainty, Sovereign Risk Premia and the Contingent Importance of the Bond Vigilantes

Christian Proaño & Jonas Dix

Metroeconomica: international review of economics2026https://doi.org/10.1111/meca.70013article
AJG 1ABDC B
Weight
0.50

What the paper says

ABSTRACT This paper investigates the implications of output gap uncertainty for the conduct of fiscal policy using a small‐scale macroeconomic model with boundedly rational agents. Specifically, agents use an adaptive updating mechanism to approximate the unobservable potential output that suffers, similarly to the Hodrick and Prescott (1997) filter, from an end‐point bias. This generates an unintendedly procyclical fiscal policy that affects the government's credibility and by extension the sovereign risk premium. Our simulations highlight the importance of this so‐called bond vigilantes channel, as well as of the government's credibility among financial markets, for the sustainability of government debt and for macroeconomic stability.

Open paper page →

Cite this paper

https://doi.org/https://doi.org/10.1111/meca.70013

Or copy a formatted citation

@article{christian2026,
  title        = {{Output Gap Uncertainty, Sovereign Risk Premia and the Contingent Importance of the Bond Vigilantes}},
  author       = {Christian Proaño & Jonas Dix},
  journal      = {Metroeconomica: international review of economics},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/meca.70013},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

Output Gap Uncertainty, Sovereign Risk Premia and the Contingent Importance of the Bond Vigilantes

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.