The Debt Capacity of a Government

The authors thank the department editor Lukas Schmid and two anonymous referees. The paper benefited from discussions by Nicola Borri at the 2021 Franco-German Fiscal seminar, by Burton Hollifield at the 2022 Western Finance Association meeting, by Mindy Xiaolan at the 2022 China International Conference in Finance, by Stijn Van Nieuwerburgh at the 2022 European Finance Association meeting, and by Vytautas Valaitis at the 2023 Oxford Saïd–ETH Zurich Macro-finance conference. The authors also thank participants at these events, as well as participants in a 2022 workshop at the Vienna School of Finance and in a 2023 workshop at the Copenhagen Business School. Useful hints and comments were received from Benjamin Bertrand, Jean-Charles Rochet, Tatsuro Senga, Raman Uppal, and Ming Yang.