Public Debt Management and the Term Structure of Interest Rates

Anders Paalzow ()
Additional contact information
Anders Paalzow: Department of Economics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden

No 148, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: This paper uses a stochastic overlapping generations model to answer the following question: How does the way the government structure its debt affect the term structure of interest rates? The analysis shows that the critical factor in determining the impact of public debt management on the term structure of interest rates is the way the induced changes in taxes and the supply of bonds affect (i) the agents’ possibilities to transfer resources intertemporally and (ii) the intergenerational distribution of wealth. It is also shown that, due to the fact that the term structure premium reflects the correlation between the buyers’ and sellers’ wealth, the effect on the term structure premium of a certain debt management policy might depend on the initial sign of the term structure premium.

Keywords: public debt management; term structure of interest rates (search for similar items in EconPapers)
JEL-codes: H63 (search for similar items in EconPapers)
Pages: 34 pages
Date: 1996-12
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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: https://EconPapers.repec.org/RePEc:hhs:hastef:0148

Access Statistics for this paper

More papers in SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Helena Lundin ().