IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Fiscal Dominance and the Long-Term Interest Rate

  • Philip Turner

Very high government debt/GDP ratios will increase uncertainty about inflation and the future path of real interest rates. This will reduce substitutability across the yield curve. In such circumstances, changes in the short-term/long-term mix of government debt held by the public will become more effective in achieving macroeconomic objectives. In circumstances of imperfect substitutability, central bank purchases or sales of government bonds have been seen historically as a key tool of monetary policy. Since the mid-1990s, however, responsibility for government debt management has been assigned to other bodies. The mandates of the government debt manager could have the unintended consequence of making their actions endogenous to macroeconomic policies. There is evidence that decisions on the maturity of debt have in the past been linked to both fiscal and monetary policy. Recent Quantitative Easing (QE) by the central bank must be analysed from the perspective of the consolidated balance sheet of government and central bank.

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/specialPapers/PDF/SP199.pdf
Download Restriction: no

Paper provided by Financial Markets Group in its series FMG Special Papers with number sp199.

as
in new window

Length:
Date of creation: May 2011
Date of revision:
Handle: RePEc:fmg:fmgsps:sp199
Contact details of provider: Web page: http://www.lse.ac.uk/fmg/

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. Joyce, Michael & Lasaosa, Ana & Stevens , Ibrahim & Tong, Matthew, 2010. "The financial market impact of quantitative easing," Bank of England working papers 393, Bank of England.
  2. Barry Eichengreen and Peter M. Garber., 1990. "Before the Accord: U.S. Monetary-Financial Policy 1945-51," Economics Working Papers 90-144, University of California at Berkeley.
  3. Alan J. Auerbach & Maurice Obstfeld, 2003. "The Case for Open-Market Purchases in a Liquidity Trap," NBER Working Papers 9814, National Bureau of Economic Research, Inc.
  4. John Y. Campbell, 1995. "Some Lessons from the Yield Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 129-152, Summer.
  5. Christopher J. Neely, 2010. "The large scale asset purchases had large international effects," Working Papers 2010-018, Federal Reserve Bank of St. Louis.
  6. Graeme Wheeler, 2004. "Sound Practice in Government Debt Management," World Bank Publications, The World Bank, number 15017.
  7. Allan H. Meltzer, 1995. "Monetary, Credit and (Other) Transmission Processes: A Monetarist Perspective," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 49-72, Fall.
  8. Frederic S. Mishkin, 2011. "Monetary Policy Strategy: Lessons from the Crisis," NBER Working Papers 16755, National Bureau of Economic Research, Inc.
  9. Hans J. Blommestein & Vincenzo Guzzo & Allison Holland & Yibin Mu, 2010. "Debt Markets: Policy Challenges in the Post-Crisis Landscape," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2010(1), pages 143-169.
  10. Tim Congdon, 2010. "Monetary Policy at the Zero Bound," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 11(1), pages 11-48, January.
  11. Mervyn King, 2004. "The Institutions of Monetary Policy," NBER Working Papers 10400, National Bureau of Economic Research, Inc.
  12. James D. Hamilton & Jing Cynthia Wu, 2011. "The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment," NBER Working Papers 16956, National Bureau of Economic Research, Inc.
  13. Jagjit S. Chadha & Sean Holly, 2011. "New Instruments of Monetary Policy," Studies in Economics 1109, School of Economics, University of Kent.
  14. Peter F. Basile & John Landon-Lane & Hugh Rockoff, 2010. "Money and Interest Rates in the United States during the Great Depression," NBER Working Papers 16204, National Bureau of Economic Research, Inc.
  15. Olivier Blanchard, 2004. "Fiscal Dominance and Inflation Targeting: Lessons from Brazil," NBER Working Papers 10389, National Bureau of Economic Research, Inc.
  16. Robert N McCauley, 2008. "Developing financial markets and operating monetary policy in Asia," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial market developments and their implications for monetary policy, volume 39, pages 126-141 Bank for International Settlements.
  17. Mervyn King, 2004. "The Institutions of Monetary Policy," American Economic Review, American Economic Association, vol. 94(2), pages 1-13, May.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:fmg:fmgsps:sp199. 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.