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Government Debt (government + debt)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

AN ENDOGENOUS GROWTH MODEL WITH PUBLIC CAPITAL AND SUSTAINABLE GOVERNMENT DEBT,

THE JAPANESE ECONOMIC REVIEW, Issue 3 2007
ALFRED GREINER
This paper presents and analyses an endogenous growth model with public capital and public debt. It is assumed that the ratio of the primary surplus to gross domestic income is a positive linear function of the debt income ratio which assures that public debt is sustainable. The paper then derives necessary conditions for the existence of a sustainable balanced growth path for the analytical model. Further, simulations are undertaken in order to gain insight into stability properties of the model and in order to analyse growth effects of deficit financed increases in public investment. The latter is done for the model on the sustainable balanced growth path as well as for the model along the transition path. [source]

Simple Monetary Rules under Fiscal Dominance

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 1 2010
MICHAEL KUMHOF
optimal simple policy rules; fiscal dominance This paper asks whether interest rate rules that respond aggressively to inflation, following the Taylor principle, are feasible in countries that suffer from fiscal dominance. We find that if interest rates are allowed to also respond to government debt, they can produce unique equilibria. But such equilibria are associated with extremely volatile inflation. The resulting frequent violations of the zero lower bound make such rules infeasible. Even within the set of feasible rules the welfare optimizing response to inflation is highly negative. The welfare gain from responding to government debt is minimal compared to the gain from eliminating fiscal dominance. [source]

Nonlinear Alternatives to Unit Root Tests and Public Finances Sustainability: Some Evidence from Latin American and Caribbean Countries,

OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 5 2008
Georgios Chortareas
Abstract We analyse the sustainability of government debt for Latin American and Caribbean countries employing unit-root tests with nonlinear alternative hypotheses and examine the robustness of our results against those from unit-root tests with breaks and threshold nonlinearities. We show that, in general support for sustainability substantially improves when nonlinear mean reversion is taken into account. We also find that the results obtained from applying various tests with nonlinear alternatives, although broadly consistent, are not identical. This suggests that reliance on a single unit-root test for assessing fiscal policy sustainability may be misleading. [source]

The Cost Effectiveness of the UK's Sovereign Debt Portfolio,

OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 4 2005
Patrick J. Coe
Abstract This paper provides a recursive empirical analysis of the scope for cost minimization in public debt management when the debt manager faces a given short-term interest rate dictated by monetary policy as well as risk and market impact constraints. It simulates the ,real-time' interest costs of alternative portfolios for UK government debt between April 1985 and March 2000. These portfolios are constructed using forecasts of return spreads based on a recursive modelling procedure. While we find statistically significant evidence of predictability, the interest cost savings are quite small when portfolio shares are constrained to lie within historical bounds. [source]

THE SYSTEMATIC RISK OF DEBT: AUSTRALIAN EVIDENCE,

AUSTRALIAN ECONOMIC PAPERS, Issue 1 2005
KEVIN DAVISArticle first published online: 21 FEB 200
This paper examines systematic risk (betas) of Australian government debt securities for the period 1979,2004 and makes three contributions to academic research and practical debate. First, the empirical work provides direct evidence on the systematic risk of government debt, and provides a benchmark for estimating the systematic risk of corporate debt which is relevant for cost of capital estimation and for optimal portfolio selection by asset managers such as superannuation funds. Second, analysis of reasons for non-zero (and time varying) betas for fixed income securities aids understanding of the primary sources of systematic risk. Third, the results cast light on the appropriate choice of maturity of risk free interest rate for use in the Capital Asset Pricing Model and have implications for the current applicability of historical estimates of the market risk premium. Debt betas are found to be, on average, significantly positive and (as expected) closely related, cross sectionally, to duration. They are, however, subject to significant time series variation, and over the past few years the pre-existing positive correlation between bond and stock returns appears to have vanished. [source]