Advanced Search
MyIDEAS: Login to save this paper or follow this series

Bond Market Clienteles, the Yield Curve and the Optimal Maturity Structure of Government Debt

Contents:

Author Info

  • Stephane Guibaud

    ()

  • Yves NOsbusch

    ()

  • Dimitri Vayanos

    ()

Abstract

We propose a clientele-based model of the yield curve and optimal maturity structure of government debt. Clienteles are generations of agents at different life cycle stages in an overlapping-generations economy. An optimal maturity structure exists in the absence of distortionary taxes and induces efficient intergenerational risksharing. If agents are more risk-averse than log, then an increase in the long-horizon clientele raises the price and optimal supply of long-term bonds. But while a welfare-maximizing government caters to clienteles, it does not accommodate fully their demand, and limits issuance of long-term bonds to a level where these earn negative expected excess returns.

Download Info

If 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.
File URL: http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/DP669PWC19_2011_BondMarketClienteles.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp669.

as in new window
Length:
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:fmg:fmgdps:dp669

Contact details of provider:
Web page: http://www.lse.ac.uk/fmg/

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Elisa Faraglia & Albert Marcet & Andrew Scott, 2008. "In Search of a Theory of Debt Management," Working Papers 348, Barcelona Graduate School of Economics.
  2. Andrew Ang & Geert Bekaert & Min Wei, 2007. "The Term Structure of Real Rates and Expected Inflation," NBER Working Papers 12930, National Bureau of Economic Research, Inc.
  3. Laurence Ball & N Gregory Mankiw, 2001. "Intergenerational Risk Sharing in the Spirit of Arrow Debreu and Rawls with Applications to Social Security Design," Economics Working Paper Archive 478, The Johns Hopkins University,Department of Economics.
  4. Dimitri Vayanos & Jean-Luc Vila, 2009. "A preferred-habitat model of the term structure of interest rates," LSE Research Online Documents on Economics 29308, London School of Economics and Political Science, LSE Library.
  5. Bhattacharya, Sudipto, 1982. " Aspects of Monetary and Banking Theory and Moral Hazard," Journal of Finance, American Finance Association, vol. 37(2), pages 371-84, May.
  6. Robin Greenwood & Dimitri Vayanos, 2008. "Bond Supply and Excess Bond Returns," NBER Working Papers 13806, National Bureau of Economic Research, Inc.
  7. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  8. Bohn, Henning, 1988. "Why do we have nominal government debt?," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 127-140, January.
  9. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
  10. George-Marios Angeletos, 2002. "Fiscal Policy With Noncontingent Debt And The Optimal Maturity Structure," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1105-1131, August.
  11. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  12. Yves Nosbusch, 2008. "Interest Costs and the Optimal Maturity Structure Of Government Debt," Economic Journal, Royal Economic Society, vol. 118(527), pages 477-498, 03.
  13. Antonio Rangel & Richard Zeckhauser, 2001. "Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 113-152 National Bureau of Economic Research, Inc.
  14. John Y. Campbell & Yves Nosbusch, 2007. "Intergenerational Risksharing and Equilibrium Asset Prices," FMG Discussion Papers dp589, Financial Markets Group.
  15. Weiss, Laurence M, 1980. "The Effects of Money Supply on Economic Welfare in the Steady State," Econometrica, Econometric Society, vol. 48(3), pages 565-76, April.
  16. James H. Stock & Mark W. Watson, 2006. "Why Has U.S. Inflation Become Harder to Forecast?," NBER Working Papers 12324, National Bureau of Economic Research, Inc.
  17. S. Rao Aiyagari & Albert Marcet & Thomas J. Sargent & Juha Seppala, 2002. "Optimal Taxation without State-Contingent Debt," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1220-1254, December.
  18. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  19. Jeremy C. Stein, 1996. "Rational Capital Budgeting in an Irrational World," NBER Working Papers 5496, National Bureau of Economic Research, Inc.
  20. Massimo BERNASCHI & Alessandro MISSALE & Davide VERGNI, 2009. "Should governments minimize debt service cost and risk? A closer look at the debt strategy. Simulation approach," Departmental Working Papers 2009-53, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  21. James H. Stock & Mark W. Watson, 2007. "Erratum to "Why Has U.S. Inflation Become Harder to Forecast?"," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(7), pages 1849-1849, October.
  22. Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, number 9780198290858, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Challe, E. & Le Grand, F. & Ragot, X., 2010. "Incomplete markets, liquidation risk, and the term structure of interest rates," Working papers 301, Banque de France.
  2. Opazo, Luis & Raddatz, Claudio & Schmukler, Sergio L., 2014. "Institutional investors and long-term investment : evidence from Chile," Policy Research Working Paper Series 6922, The World Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fmg:fmgdps:dp669. See general 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: (The FMG Administration).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.