Pushing the Limit: Last-Minute Debt Limit Resolutions Have Increased Market Volatility and Uncertainty

Stefan Jacewitz, W. Blake Marsh and Nicholas Sly
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W. Blake Marsh: https://www.kansascityfed.org/research-staff/w-blake-marsh/

Economic Bulletin, 2023, issue February 22, 2023, 4

Abstract: Since reaching the debt limit in January 2023, the U.S. Treasury has used extraordinary measures to fund the government. However, the Treasury estimates those measures will be exhausted later this year. To gauge possible effects, we review economic and financial market outcomes during previous debt limit episodes. In each case, these episodes led to increased borrowing costs, financial market volatility, and uncertainty, particularly when the resolutions were prolonged.

Keywords: national debt; debt limit; financial markets (search for similar items in EconPapers)
JEL-codes: B22 H6 (search for similar items in EconPapers)
Date: 2023
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