What drives domestic sovereign bond yields in Emerging Market and Developing Economies (EMDEs)? This paper shows that fiscal policy expectations are central to domestic yields, with effects amplified by the sovereign--bank nexus. A tractable Fiscal Theory of the Price Level framework explains why fiscal shocks affect domestic but not external bond yields. Following Laubach (2009)'s approach, a 1 percentage point increase in expected primary deficits raises 10-year domestic yields by about 36 basis points, rising to 50 basis points in countries with elevated bank exposures to sovereign debt. In contrast, external bond spreads respond mainly to global risk factors. These findings highlight the role of fiscal expectations and domestic financial structure in shaping sovereign borrowing costs in EMDEs.

This paper investigates whether AI adoption has induced structural changes in the determinants of Indian sovereign bond yields across the maturity spectrum. Using monthly data from 2000 to 2025 and autoregressive distributed lag (ARDL) models augmented with an AI dummy variable and slope interactions on expected inflation and broad money (M3) growth, we identify significant regime shifts. Results indicate that in the post-AI period, longer-maturity yields exhibit markedly reduced sensitivity to expected inflation and money supply growth. This dampening is statistically significant, with interaction terms largely offsetting baseline positive elasticities. By contrast, short-term yields (91-day Treasury bills) show heightened inflation sensitivity in the AI era, while intermediate yields display mixed patterns. These findings are consistent with theoretical predictions that AI-driven productivity gains could lower equilibrium real interest rates and weaken traditional monetary transmission channels at the long end of the yield curve.

This paper studies the effects of fiscal shocks on the dynamics of public debt and other fiscal and macroeconomic variables. The data are annual and cover all the members of the European Union from 2001 to 2024. The fiscal shocks are identified using orthogonalised forecast errors computed from European Commission forecasts, and the impulse responses are generated using local projections. Primary balance shocks lower government debt measured in per cent of GDP, but the effect is gradual and is initially modest. There are large differences in how revenue and expenditure measures affect the stock of public debt. Revenue shocks have gradual and statistically insignificant effects, while primary expenditure shocks have fast, relatively large and statistically significant effects. The effects on the public debt stock differ because the resulting fiscal reactions are different for revenue or spending shocks.

This study examines the tension between rising public debt and climate finance mobilization in developing economies. Analyzing eight African and Latin American nations (2000–2023) using system generalized methods of moments, we investigate how economic structure mediates the climate-debt trap. Findings reveal a non-linear debt-to-growth relationship, with a significant threshold at 60% of GDP. Beyond this point, debt severely impedes growth, particularly in resource-rich nations. We identify a climate-debt trap where high public debt erodes the growth benefits of debt-creating climate loans; conversely, non-debt-creating grants remain fiscally resilient. By integrating non-linear thresholds with structural classifications, this paper finds the trap is conditional on economic type. We reject one-size-fits-all hypothesis, recommending tailored strategies: international financial institutions should prioritize grants for debt-vulnerable, resource-rich nations while utilizing loans for diversifying economies. This novel framework provides a roadmap for ensuring sustainable growth amidst escalating climate and fiscal pressures.