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Parameterizing Debt Maturity

Author

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  • Mr. Philip Barrett
  • Christopher Johns

Abstract

This paper examines ways to summarize the maturity structure of public debts using a small number of parameters. We compile a novel dataset of all promised future payments for US and UK government debt from every month since 1869, and more recently for Peru, Poland, Egypt, and Nigeria. We show that there is a unique parametric form which does not arbitrarily restrict debt issuance – portfolios of bonds with exponential coupons. Compared to the most popular alternative, this form 1) more accurately describes changes in debt maturity for these six countries and 2) gives a quite different interpretation of historical debt maturity. Our work can be applied not just to analyze past debt movements, but – because parameter estimates are relatively similar across countries – also for monitoring changes in debt maturity, including in countries where data are partial or incomplete.

Suggested Citation

  • Mr. Philip Barrett & Christopher Johns, 2021. "Parameterizing Debt Maturity," IMF Working Papers 2021/101, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2021/101
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    Cited by:

    1. Boris Chafwehé & Charles de Beauffort & Rigas Oikonomou, 2022. "Optimal Monetary Policy Rules in the Fiscal Theory of the Price Level," LIDAM Discussion Papers IRES 2022026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    Keywords

    maturity structure; debt maturity; MLE estimate; debt issuance; debt obligation; Bonds; Securities markets; Securities; Emerging and frontier financial markets;
    All these keywords.

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