Is the supply of long-term debt independent of the term premia? Evidence from Portugal
Antonio Afonso and
Manish Singh ()
No 2016/11, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa
An important assumption in the statistical analysis of the nancial market effects of the central bank's large scale asset purchase program is that the `long-term debt stock variables were exogenous to term premia'. We test this assumption for a small open economy in a currency union over the period 2000M3 to 2015M10, via the determinants of shortterm financing relative to long-term nancing. Empirical estimations indicate that the maturity composition of debt does not respond to the level of interest rate or to the term structure. These ndings suggest a lower adherence to the cost minimization mandate of debt management. However, we nd that volatility and relative market size respectively decrease and increase short-term financing relative to long-term nancing, while it decreases with an increase in government indebtedness. Key Words : sovereign debt management, long-term interest rate, portfolio balance channel, Bank of Portugal
JEL-codes: E43 E52 (search for similar items in EconPapers)
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More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
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