Discount rates, debt maturity, and the fiscal theory
- This paper examines how the transmission of government portfolio risk arising from maturity operations depends on the stance of monetary/fiscal policy. Accounting for risk premia in the fiscal theory allows the government portfolio to affect the expected inflation, even in a frictionless economy. The effects of maturity rebalancing on expected inflation in the fiscal theory directly depend on the conditional nominal term premium, giving rise to an optimal debt maturity policy that is state dependent. In a calibrated macro-finance model, we demonstrate that maturity operations have sizable effects on expected inflation and output through our novel risk transmission mechanism.
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| Author: | Alexandre Corhay, Thilo Kind, Howard Kung, Gonzalo Morales |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-616375 |
| URL: | https://ssrn.com/abstract=3940955 |
| Parent Title (English): | SAFE working paper ; No. 323 |
| Series (Serial Number): | SAFE working paper (323) |
| Publisher: | SAFE |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2021 |
| Year of first Publication: | 2021 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2021/10/18 |
| Tag: | Bond risk premia; DSGE models; Fiscal theory of the price level; Government debt; Nonlinear solution methods; erm structure of interest rates |
| Issue: | July 2021 |
| Page Number: | 63 |
| HeBIS-PPN: | 487404416 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
