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Fiscal Policy and Microstructure of Treasury Bonds

Author

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  • Oscar Mauricio Valencia

    (Directorate of Economic Studies National Planning Department of Colombia)

Abstract

This paper presents an alternative approach to understand the role of insurer in an economy with incomplete market. Based in a simple Stokey-Lucas framework. I construct a model with microstructure in the treasury bond markets with heterogenous bidders. The quantities and prices of the treasury bonds are a result of an auction mechanism, where the agents infer the private valuation distribution of others agents in order to obtain individual valuations. In this environment, the government borrowing constraint is endogenously determined by strategic behavior, and therefore the government insurer role depends on the size of incompleteness of public debt markets

Suggested Citation

  • Oscar Mauricio Valencia, 2006. "Fiscal Policy and Microstructure of Treasury Bonds," Computing in Economics and Finance 2006 328, Society for Computational Economics.
    • Handle: RePEc:sce:scecfa:328
    as

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    More about this item

    Keywords

    Heterogenous Agents; Microstructure Models; Fiscal Policy;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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