Public Debt and Low Interest Rates

Public Debt Accumulation and Interest Rates in Canada 1974-1998

After a steady decline following World War II, the ratio of Canadian public sector debt to GDP reached a minimum of 6% in 1974. Between 1975 and 1995, this ratio increased until it reached a maximum of 81% in 1995. What were the causes of the accumulation of government debt in Canada between 1975 and 1995? How large were the respective contributions of high interest rates, low growth rates, the...

Federal Govemtnent Debt and Interest Rates

Government Debt and Interest Rates ” NBER Macroeconomics Annual

Capital Structure, Debt Maturity, and Stochastic Interest Rates

for their advice on an earlier version where a static model was developed. Abstract This paper develops a model in which an optimal capital structure and an optimal debt maturity are jointly determined in a stochastic interest rate environment. Valuation formulas are derived in closed form and numerical solutions are used to obtain comparative statics. The model yields leverage ratios and debt ...

Defaultable Debt, Interest Rates, and the Current Account

World capital markets have experienced large scale sovereign defaults on a number of occasions, the most recent being Argentina’s default in 2002. In this paper we develop a quantitative model of debt and default in a small open economy. We use this model to match four empirical regularities regarding emerging markets: defaults occur in equilibrium, interest rates are countercyclical, net expor...