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.
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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:
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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.:
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NBER Working Papers
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