Strained government finances may, for example, weaken the ability to ensure financial stability (Das et al. 2010, Davies and Ng 2011). Furthermore, high levels of public sector debt may amplify under some conditions the effects of cyclical shocks due to raising sovereign risk (Corsetti et al. 2013).
Takáts, Elod, and Abraham Vela (2014). “International Monetary Policy Transmission (PDF),” BIS Papers Series 78. Basel, Switzerland: Bank for International Settlements, August. Tarullo, Daniel K. (2014). “Stress Testing after Five Years,” speech delivered at the Third Annual Stress Test Modeling Symposium, sponsored by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of Boston, Boston, June 25.