A framework for debt-maturity management
Galo Nuño Barrau () and
Juan Passadore ()
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Juan Passadore: EIEF
No 1919, Working Papers from Banco de España
We characterize the optimal debt-maturity management problem of a government in a small open economy. The government issues a continuum of finite-maturity bonds in the presence of liquidity frictions. We find that the solution can be decentralized: the optimal issuance of a bond of a given maturity is proportional to the difference between its market price and its domestic valuation, the latter defined as the price computed using the government’s discount factor. We show how the steady-state debt distribution decreases with maturity. These results hold when extending the model to incorporate aggregate risk or strategic default.
Keywords: debt maturity; debt management; liquidity costs (search for similar items in EconPapers)
JEL-codes: F34 F41 G11 (search for similar items in EconPapers)
Pages: 93 pages
New Economics Papers: this item is included in nep-dge and nep-opm
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Working Paper: A Framework for Debt-Maturity Management (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1919
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