Monetary policy, bond returns and debt dynamics

Antje Berndt and Sevin Yeltekin ()

Journal of Monetary Economics, 2015, vol. 73, issue C, 119-136

Abstract: Using the government׳s intertemporal budget constraint, we quantify the contribution of returns paid on the U.S. government׳s debt portfolio to the evolution of the debt-to-GDP ratio. We show that announcements of unconventional monetary policy measures by the Federal Reserve between 2008.IV and 2012, as a part of macroeconomic stabilization, were associated with a sizable increase in returns and debt-to-GDP ratios and contributed to fiscal imbalances. We use the Federal Reserve׳s portfolio composition as a proxy for unconventional monetary policy measures and show that it is significantly related to future bond returns and fiscal balances.

Keywords: Monetary policy; Debt dynamics; Bond returns; Predictability (search for similar items in EconPapers)
JEL-codes: C5 E4 E6 G1 H6 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:73:y:2015:i:c:p:119-136

DOI: 10.1016/j.jmoneco.2015.03.001

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