Fiscal Policy, Public Debt and the Term Structure of Interest Rates

Fiscal Policy, Public Debt and the Term Structure of Interest Rates
Author: Roland Demmel
Publisher: Springer Science & Business Media
Total Pages: 284
Release: 2012-12-06
Genre: Business & Economics
ISBN: 3642585957

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The introduction of the thesis consists of four parts: first, we motivate our chosen macroeconomic setting by looking at some real world phenomena. For a better understanding of these phenomena, we argue that the mutual dynamic interactions between flScal policy and financial markets need to be closely examined in a macroeconomic framework. Second, we review different strands of the economic literature in order to show that most of the literature has so far exclusively concentrated either on fmancial market dynamics or on flScal policy issues. We conclude that a more integrated model setting is called for in order to explain the dynamic interactions observed in reality. Third, we discuss at length the economic assumptions underlying our model. This avoids multiple repetition later on. Finally, we outline the structure of the thesis and the objectives we pursue in the different chapters. 1. 1 Motivation Fiscal policy and financial market reactions are increasingly receiving world wide attention. The most recent examples are the Maastricht criteria about flScal control, the South-East Asia financial crisis and the resulting IMF policy stance, the high level of public debt in developed and developing countries and the effect on interest rates and economic growth. In contrast to the still underdeveloped theoretical literature on these dynamic links, finding empirical evidence that supports the existence of these links is not a very hard task.

Fiscal Policy and Interest Rates in the European Union

Fiscal Policy and Interest Rates in the European Union
Author: Klaas Knot
Publisher: Edward Elgar Publishing
Total Pages: 232
Release: 1996-01-01
Genre: Business & Economics
ISBN: 9781781959657

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This is an extensive study concerned with the potential effects of fiscal policy on financial markets in the EU. It takes into account the gradual liberalization of capital movements through Western Europe & the framework of the European Monetary System.

Public Debt Management

Public Debt Management
Author: Rudiger Dornbusch
Publisher: Cambridge University Press
Total Pages: 384
Release: 1990-11-30
Genre: Political Science
ISBN: 1139935860

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As Europe proceeds towards economic and monetary union, fiscal convergence and the prospect of a common money are at the centre of discussion. This volume from the Centre for Economic Policy Research brings together theoretical, applied and historical research on the management of public debt and its implications for financial stability. Gale fills a gap in the literature, using a consistent framework to investigate the welfare economics of public debt, while Calvo and Guidotti analyse the trade-off between indexation and maturity when it comes to minimizing debt service. Confidence crises have become relevant again in view of the high debt ratios in countries such as Belgium, Italy and Ireland. Alesina, Prati and Tabellini develop a formal model of the propagation of a debt run and use it to interpret Italian debt panics. Giavazzi and Pagano concentrate on how inappropriate debt management can precipitate a run on the currency while Makinen and Woodward review a broad sweep of historical experience.

Fiscal Deficits, Public Debt, and Sovereign Bond Yields

Fiscal Deficits, Public Debt, and Sovereign Bond Yields
Author: Mr. Manmohan S. Kumar
Publisher: International Monetary Fund
Total Pages: 31
Release: 2010-08-01
Genre: Business & Economics
ISBN: 1455201677

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The recent sharp increase in fiscal deficits and government debt in many countries raises questions regarding their impact on long-term sovereign bond yields. While economic theory suggests that this impact is likely to be adverse, empirical results have been less clear cut, have generally ignored nonlinear effects of deficits and debt through some other key determinants of yields, and have been mostly confined to advanced economies. This paper reexamines the impact of fiscal deficits and public debt on long-term interest rates during 1980 - 2008, taking into account a wide range of country-specific factors, for a panel of 31 advanced and emerging market economies. It finds that higher deficits and public debt lead to a significant increase in long-term interest rates, with the precise magnitude dependent on initial fiscal, institutional and other structural conditions, as well as spillovers from global financial markets. Taking into account these factors suggests that large fiscal deficits and public debts are likely to put substantial upward pressures on sovereign bond yields in many advanced economies over the medium term.

The Term Structure of Interest Rates

The Term Structure of Interest Rates
Author: Jacob B. Michaelsen
Publisher:
Total Pages: 200
Release: 1973
Genre: Business & Economics
ISBN:

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Public Debt in a Democratic Society

Public Debt in a Democratic Society
Author: James M. Buchanan
Publisher: Washington, D.C. : American Enterprise Institute for Public Policy Research
Total Pages: 88
Release: 1967
Genre: Business & Economics
ISBN:

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Optimal Fiscal and Monetary Policy, Debt Crisis and Management

Optimal Fiscal and Monetary Policy, Debt Crisis and Management
Author: Mr.Cristiano Cantore
Publisher: International Monetary Fund
Total Pages: 44
Release: 2017-03-30
Genre: Business & Economics
ISBN: 1475590199

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The initial government debt-to-GDP ratio and the government’s commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidation is very slow. A faster pace is optimal when the economy starts from a high level of public debt implying high sovereign risk premia, unless these are suppressed via a bailout by official creditors. Under discretion, the cost of not being able to commit is reflected into a quick consolidation of government debt. Simple monetary-fiscal rules with passive fiscal policy, designed for an environment with “normal shocks”, perform reasonably well in mimicking the Ramsey-optimal response to one-off government debt shocks. When the government can issue also long-term bonds–under commitment–the optimal debt consolidation pace is slower than in the case of short-term bonds only, and entails an increase in the ratio between long and short-term bonds.

Public Debt and Economic Growth

Public Debt and Economic Growth
Author: Alfred Greiner
Publisher: Springer Science & Business Media
Total Pages: 148
Release: 2009-07-24
Genre: Business & Economics
ISBN: 3642017452

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Starting point of this book is the observation that an increase in public debt must be accompanied by a rise in the primary surplus of the government to guarantee sustainability of public debt. The book first elaborates on that principle from a theoretical point of view and then tests whether empirical evidence for that rule can be found. Additional tests are implemented to gain further evidence on sustainability of public debt. In order to allow for time varying coefficients penalized spline estimations are performed. The theoretical chapters present endogenous growth models and assume that the primary surplus rises as public debt increases so that sustainability of public debt is given. Implications of public deficits and debt are studied assuming full employment and for unemployment. The conclusion summarizes the findings and compares the results of the different models. Finally, policy implications are given showing how governments should deal with high public debt to GDP ratios.