Public Debt, Consumption Growth, and the Slope of the Term Structure

• 成果类型: Article
• 署名作者: Nguyen, Thien T.
• 署名单位: University System of Ohio; Ohio State University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab123
• 发表日期: 2022
• 页码: 3742
• 关键词: Long-run risks; monetary-policy; interest-rates; intertemporal substitution; political uncertainty; wage rigidity; fiscal-policy; asset prices; US; expectations

摘要

The debt-to-GDP ratio negatively predicts cumulative nominal consumption growth up to a 10-year horizon, resulting from the ratio's ability to forecast lower inflation and real growth. Moreover, the debt-to-GDP ratio is positively associated with yield spreads. I rationalize these facts in a model in which positive shocks to government debt cause lower inflation and growth, making bonds attractive assets. Furthermore, because longer-term bonds are less exposed to current debt shock than are shorter-term bonds, they are better hedges, resulting in high yield spreads in high-debt states. The model highlights the importance of fiscal risk in understanding the Treasury bond market.