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The Term Structure of Interest Rates and the Public Debt Issuance Policy: A Note

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Author Info

  • Gustavo Piga

    ()
    (University of Rome II)

  • Giorgio Valente

    ()
    (The Chinese University of Hong Kong)

Abstract

We estimate, using a previously unexploited set of data for the Italian public debt, quarterly yield curves over the period 1970-1996 to test the main implications of the expectations hypothesis theory (EH). Our empirical results show that short-term interest rates move according to the prediction of the EH, though the same cannot be found for long-term interest rates. In addition, using a probit model, we investigate the public debt issuance policy. We find and interpret a significant relationship between the slope of the yield curve and the probability of an increase in the aggregate duration of the outstanding debt.

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Bibliographic Info

Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 49.

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Length: 12
Date of creation: 30 Apr 2004
Date of revision:
Handle: RePEc:rtv:ceisrp:49

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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Web page: http://www.ceistorvergata.it
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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Web: http://www.ceistorvergata.it

Related research

Keywords: Term Structure of Interest Rates; Expectations Hypothesis; Public Debt Management;

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Cited by:
  1. Stefano Schiavo, 2005. "Euro bonds: in search of financial spillovers," Department of Economics Working Papers 0502, Department of Economics, University of Trento, Italia.
  2. Giorgio Basevi & Lorenzo Pecchi & Gustavo Piga, 2005. "Parallel Monies, Parallel Debt: Lessons from the EMU and Options for the New EU," CEIS Research Paper 68, Tor Vergata University, CEIS.
  3. repec:spo:wpecon:info:hdl:2441/7162 is not listed on IDEAS

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