Government debt and risk premia *

• 成果类型: Article
• 署名作者: Liu, Yang
• 署名单位: University of Hong Kong
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2023.01.009
• 发表日期: 2023
• 页码: 18-34
• 关键词: Government debt; risk premia; Fiscal policy risk

摘要

Risk premia increase with government debt. Debt-to-GDP ratios positively predict stock re-turns at short and long horizons in the U.S. and other advanced economies. Higher debt is also associated with higher bond premia and lower risk-free rates. Major government debt theories (liquidity, safety, crowding out) either do not address or are inconsistent with these findings. New evidence suggests that the increased risk premia provide com-pensation for larger fiscal risk; during periods of elevated debt, fiscal policy becomes more uncertain and less effective and can lead to debt crises. I quantify these mechanisms in an equilibrium model. (c) 2023 The Author. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( http://creativecommons.org/licenses/by-nc-nd/4.0/ )