Borrowing Short- or Long-Term: Does the Government Really Face a Trade-off?
AbstractThis paper considers a broader fiscal policy framework in public debt management decisions by examining the interrelations between interest rates and the economy. This approach has the potential to result in a new optimal debt maturity structure. A shorter debt structure is generally less expensive and may also contribute to stabilize the budget balance as interest rates tend to decline when the economy is weak. Ce papier envisage le cadre plus large de la politique budgétaire dans les décisions de gestion de la dette publique tout en examinant les interrelations entre les taux d’intérêts et l’économie. Cette approche peut potentiellement résulter en une nouvelle structure optimale de maturité de la dette. Une structure plus à court terme est généralement moins coûteuse et peut contribuer à stabiliser la balance budgétaire si les taux d’intérêt tendent à baisser quand l’économie est fragile.
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Bibliographic InfoPaper provided by Department of Finance Canada in its series Working Papers-Department of Finance Canada with number 2003-16.
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