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Consequences of Debt Policy in a Stochastically Growing Monetary Economy

E-L Grinols and Stephen J Turnovsky

Discussion Papers in Economics at the University of Washington from Department of Economics at the University of Washington

Abstract: The effects of open market operations and long versus short bond financing on risk in financial markets in a stochastically growing economy are studied. An increase in short bonds, resulting from exchanging long bonds, increases the riskiness of long bonds and raises their real rate of return. An open market purchase of either long or short bonds raises the price of long bonds and lowers their risk and real return.

Keywords: INTEREST RATE; MACROECONOMICS (search for similar items in EconPapers)
JEL-codes: E44 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1997
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Related works:
Journal Article: Consequences of Debt Policy in a Stochastically Growing Monetary Economy (1998)
Working Paper: Consequences of Debt Policy in a Stochastically Growing Monetary Economy (1997)
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