Optimal maturity of government debt without state contingent bonds
AbstractThis paper shows that state contingent debt can be syntethically constructed using non-contingent debt of diÂ¤erent maturities. A main policy implication of this principle is that the complete markets Ramsey allocation can be sustained with non-contingent debt only, by properly managing its maturity structure. The numerical experiments, however, suggest that this policy implication ought to be taken with care. We â¦nd that the debt positions that sustain the Ramsey allocation are very high (on the order of a few hundred times total GDP for a very simple four state economy) and increasing in the number of states. In addition, they are very sensitive to small variations in the parameters of the model
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 51 (2004)
Issue (Month): 3 (April)
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Web page: http://www.elsevier.com/locate/inca/505566
Other versions of this item:
- Juan Pablo Nicolini & Francisco Buera, 2002. "Optimal Maturity of Governement Debt without state contingent bonds," Department of Economics Working Papers 016, Universidad Torcuato Di Tella.
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