Optimal State-Contingent Expenditure Rules, Fiscal Transparency, and Sovereign Risk in Crises:

We have compared the global nonlinear solution to a first-order perturbation around the deterministic steady state. The global solution delivers larger welfare gains from transparency and more pronounced nonlinearities in crisis states, especially for high initial debt.
The numerical implementation is written in a modular way. The main scripts are illusrated as below
•run_model.m (or the equivalent high-level script): sets parameters, calls the solver, and produces simulated moments.
•grids.m: constructs the state grids for k,b,z,ξ,η,τ.
•solver.m: implements the global VFI algorithm described above.
•utility.m: evaluates uc,n,s and checks feasibility.