Government Debt Management: The Long and the Short of It

• 成果类型: Article
• 署名作者: Faraglia, Elisa; Marcet, Albert; Oikonomou, Rigas; Scott, Andrew
• 署名单位: University of Cambridge; Center for Economic & Policy Research (CEPR); University of London; University College London; Barcelona School of Economics; Universite Catholique Louvain; University of London; London Business School
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdy061
• 发表日期: 2019
• 页码: 2554-2604
• 关键词: optimal maturity structure

摘要

Standard optimal Debt Management (DM) models prescribe a dominant role for long bonds and advocate against issuing short bonds. They require very large positions in order to complete markets and assume each period that governments repurchase all outstanding bonds and reissue (r/r) new ones. These features of DM are inconsistent with U.S. data. We introduce incomplete markets via small transaction costs which serves to make optimal DM more closely resemble the data : r/r are negligible, short bond issuance substantial and persistent and short and long bonds positively co-vary. Intuitively, long bonds help smooth taxes over states and short bonds over time. Solving incomplete market models with multiple assets is challenging so a further contribution of this article is introducing a novel computational method to find global solutions.