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Fiscal Policy and the Nominal Term Premium

Author

Listed:
  • Roman Horvath

    (Charles University, Prague, Czech Republic)

  • Lorant Kaszab

    (Magyar Nemzeti Bank, Budapest, Hungary)

  • Ales Marsal

    (Narodna banka Slovenska, Bratislava, Slovakia)

Abstract

We estimate a New Keynesian model on post-war US data with generalised method of moments using either constant or time-varying debt and distortionary labor income taxes. We show that accounting for government debt and distortionary taxes help the New Keynesian model match the level of the nominal term premium with a lower relative risk-aversion than typically found in the literature.

Suggested Citation

  • Roman Horvath & Lorant Kaszab & Ales Marsal, 2019. "Fiscal Policy and the Nominal Term Premium," Working and Discussion Papers WP 9/2019, Research Department, National Bank of Slovakia.
    • Handle: RePEc:svk:wpaper:1068
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    References listed on IDEAS

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    Cited by:

    1. Horvath, Roman & Kaszab, Lorant & Marsal, Ales, 2021. "Equity premium and monetary policy in a model with limited asset market participation," Economic Modelling, Elsevier, vol. 95(C), pages 430-440.
    2. Ales Marsal & Lorant Kaszab & Roman Horvath, 2017. "Government Spending and the Term Structure of Interest Rates in a DSGE Model," Working and Discussion Papers WP 3/2017, Research Department, National Bank of Slovakia.
    3. Roman Horvath & Lorant Kaszab & Ales Marsal, 2022. "Interest rate rules and inflation risks in a macro‐finance model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(4), pages 416-440, September.
    4. Ales Marsal & Katrin Rabitsch & Lorant Kaszab, 2023. "From Linear to Nonlinear: Rethinking Inflation Dynamics in the Calvo Pricing Mechanism," Department of Economics Working Papers wuwp350, Vienna University of Economics and Business, Department of Economics.

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    More about this item

    Keywords

    zero-coupon bond; nominal term premium; balanced budget rule; income taxation;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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