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

Author

Listed:
  • 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.

Suggested Citation

  • Gustavo Piga & Giorgio Valente, 2004. "The Term Structure of Interest Rates and the Public Debt Issuance Policy: A Note," CEIS Research Paper 49, Tor Vergata University, CEIS.
  • Handle: RePEc:rtv:ceisrp:49
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    File URL: ftp://www.ceistorvergata.it/repec/rpaper/No-49-Piga,Valente.pdf
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    Cited by:

    1. Stefano Schiavo, 2005. "Euro bonds: in search of financial spillovers," Sciences Po publications 2, Sciences Po.
    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

    More about this item

    Keywords

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

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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