Economics at your fingertips  

Towards a More Complete Debt Strategy Simulation Framework

David Bolder

Staff Working Papers from Bank of Canada

Keywords: Interest rates; Econometric and statistical methods; Debt management (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Pages: 71 pages Abstract: An effective technique governments use to evaluate the desirability of different financing strategies involves stochastic simulation. This approach requires the postulation of the future dynamics of key macroeconomic variables and the use of those variables in the construction of a debt charge distribution for each individual financing strategy. Summary measures of the resulting debt charge distributions permit comparison of the alternative financing strategies. To defensibly generate a debt charge distribution for a given financing strategy, however, one must have a good model to simulate the future dynamics of a set of key macroeconomic variables into the future. This paper suggests a reduced-form approach to describe the key elements of the stochastic model used to analyze the Government of Canada's debt strategy problem. To this end, a simple algorithm is proposed for the simultaneous simulation of the business cycle, the government's financial position, and the term structure of interest rates. The approach uses the constant parameter hidden-Markov model introduced by Hamilton (1989) in combination with the class of affine term-structure models.
Date: 2002
New Economics Papers: this item is included in nep-cmp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

Page updated 2023-01-25
Handle: RePEc:bca:bocawp:02-13