| 来源类型 | Discussion paper |
| 规范类型 | 论文 |
| 来源ID | DP6873 |
| DP6873 Do Peso Problems Explain the Returns to the Carry Trade? | |
| Martin Eichenbaum; Sérgio Rebelo; Craig Burnside; Isaac Kleshchelski | |
| 发表日期 | 2008-06-20 |
| 出版年 | 2008 |
| 语种 | 英语 |
| 摘要 | A growing literature integrates theories of debt management into models of optimal fiscal policy. One promising theory argues that the composition of government debt should be chosen so that fluctuations in the market value of debt offset changes in expected future deficits. This complete market approach to debt management is valid even when the government only issues non-contingent bonds. A number of authors conclude from this approach that governments should issue long term debt and invest in short term assets. We argue that the conclusions of this approach are too fragile to serve as a basis for policy recommendations. This is because bonds at different maturities have highly correlated returns, causing the determination of the optimal portfolio to be ill-conditioned. To make this point concrete we examine the implications of this approach to debt management in various models, both analytically and using numerical methods calibrated to the US economy. We find the complete market approach recommends asset positions which are huge multiples of GDP. Introducing persistent shocks or capital accumulation only worsens this problem. Increasing the volatility of interest rates through habits partly reduces the size of these positions but at the cost of introducing extreme volatility in asset holdings. Across these simulations we find no presumption that governments should issue long term debt - policy recommendations can be easily reversed through small perturbations in the specification of shocks or small variations in the maturity of bonds issued. We further extend the literature by removing the assumption that governments every period costlessly repurchase all outstanding debt. This exacerbates the size of the required positions, worsens their volatility and in some cases produces instability in debt holdings. We conclude that it is very difficult to insulate fiscal policy from shocks by using the complete markets approach to debt management. Given the limited variability of the yield curve using maturities is a poor way to substitute for state contingent debt. The result is the positions recommended by this approach conflict with a number of features that we believe are important in making bond markets incomplete e.g allowing for transaction costs, liquidity effects, etc..Until these features are all fully incorporated we remain in search of a theory of debt management capable of providing robust policy insights. |
| 主题 | International Macroeconomics |
| 关键词 | Complete markets Debt management Government debt Maturity structure Yield curve |
| URL | https://cepr.org/publications/dp6873 |
| 来源智库 | Centre for Economic Policy Research (United Kingdom) |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/535700 |
| 推荐引用方式 GB/T 7714 | Martin Eichenbaum,Sérgio Rebelo,Craig Burnside,et al. DP6873 Do Peso Problems Explain the Returns to the Carry Trade?. 2008. |
| 条目包含的文件 | 条目无相关文件。 | |||||
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