Persistent Deficits and the Market Value of Government Debt
AbstractThis paper investigates whether postwar Canadian public financial policy satisfies a borrowing constraint. Direct tests of the present-value relation suggested by this constraint shed light on the sustainability of current policy. We examine monthly data on Canadian federal government finances using tests for cointegration. The finding is that the joint behavior of real debt and real surpluses is inconsistent with intertemporal budget balance for the government. One interpretation of this finding is that the government is systematically paying real returns to bondholders by issuing further debt. Alternatively, bondholders may expect the government to finance future interest payments from a source other than primary surpluses, e.g. the sale of physical assets. Copyright 1991 by John Wiley & Sons, Ltd.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.
Volume (Year): 6 (1991)
Issue (Month): 1 (Jan.-March)
Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/0883-7252/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.