A Continuous-Time Model of the Term Structure of Interest Rates with Fiscal-Monetary Policy Interactions
AbstractWe study the term structure implications of the fiscal theory of price level determination. We introduce the intertemporal budget constraint of the government in a general equilibrium model in continuous time. Fiscal policy is set according to a simple rule whereby taxes react proportionally to real debt. We show how to solve for the prices of real and nominal zero coupon bonds.
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.
Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2008:6.
Length: 27 pages
Date of creation: 29 Jul 2008
Date of revision:
Contact details of provider:
Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
More information through EDIRC
Bond Pricing; Fiscal Policy; Mathematical Methods;
Other versions of this item:
- Marzo, Massimiliano & Romagnoli, Silvia & Zagaglia, Paolo, 2008. "A continuous-time model of the term structure of interest rates with fiscal-monetary policy interactions," Research Discussion Papers 25/2008, Bank of Finland.
- D90 - Microeconomics - - Intertemporal Choice - - - General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-14 (All new papers)
- NEP-CBA-2008-08-14 (Central Banking)
- NEP-DGE-2008-08-14 (Dynamic General Equilibrium)
- NEP-MON-2008-08-14 (Monetary Economics)
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.:
- Breeden, Douglas T., 1986. "Consumption, production, inflation and interest rates : A synthesis," Journal of Financial Economics, Elsevier, vol. 16(1), pages 3-39, May.
- Stulz, Rene M, 1986. " Asset Pricing and Expected Inflation," Journal of Finance, American Finance Association, vol. 41(1), pages 209-23, March.
- Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "An Intertemporal General Equilibrium Model of Asset Prices," Econometrica, Econometric Society, vol. 53(2), pages 363-84, March.
- Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sten Nyberg).
If references are entirely missing, you can add them using this form.