Fiscal Policy and Microstructure of Treasury Bonds

Oscar Valencia ()

No 328, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: This paper presents an alternative approach to understand the role of insurer in an economy with incomplete market. Based in a simple Stokey-Lucas framework. I construct a model with microstructure in the treasury bond markets with heterogenous bidders. The quantities and prices of the treasury bonds are a result of an auction mechanism, where the agents infer the private valuation distribution of others agents in order to obtain individual valuations. In this environment, the government borrowing constraint is endogenously determined by strategic behavior, and therefore the government insurer role depends on the size of incompleteness of public debt markets

Keywords: Heterogenous Agents; Microstructure Models; Fiscal Policy (search for similar items in EconPapers)
JEL-codes: E37 E62 (search for similar items in EconPapers)
Date: 2006-07-04
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecfa:328

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