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Pushing the Limit: Last-Minute Debt Limit Resolutions Have Increased Market Volatility and Uncertainty

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Abstract

Since reaching the debt limit in January 2023, the U.S. Treasury has used extraordinary measures to fund the government. However, the Treasury estimates those measures will be exhausted later this year. To gauge possible effects, we review economic and financial market outcomes during previous debt limit episodes. In each case, these episodes led to increased borrowing costs, financial market volatility, and uncertainty, particularly when the resolutions were prolonged.

Suggested Citation

  • Stefan Jacewitz & W. Blake Marsh & Nicholas Sly, 2023. "Pushing the Limit: Last-Minute Debt Limit Resolutions Have Increased Market Volatility and Uncertainty," Economic Bulletin, Federal Reserve Bank of Kansas City, issue February , pages 1-4, February.
    • Handle: RePEc:fip:fedkeb:95697
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    File URL: https://www.kansascityfed.org/Economic%20Bulletin/documents/9368/EconomicBulletin23JacewitzMarshSly0222.pdf
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    More about this item

    Keywords

    national debt; debt limit; financial markets;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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