a r t i c l e i n f o Keywords: Estimation of term structure of interest rate Financial reforms Latent factor extraction Level Monetary policy Yield curve movements The article identifies principal reasons underlying the movements of yield curve for government debt market in India for the period Jul '97 to Dec '11. The study finds that though statistically Svensson's (SV) (1994) model outperfor...

Since the economic crisis erupted in 2008, Chinese government has carried out the proactive fiscal policy and moderate looser monetary policy, which has kept down the tendency of declining economic growth. At the same time, Chinese government debt risk problem has emerged. How to manage the risk of local government debt exposure has been a major challenge to local government. This paper carried...

Using a novel dataset of accounting and market information that spans most publicly traded nonfinancial firms over the last century, we show that U.S. federal government debt issuance significantly affects corporate financial policies and balance sheets through its impact on investors’ portfolio allocations and the relative pricing of different assets. Government debt is strongly negatively cor...

Using a novel dataset of accounting and market information that spans most publicly traded firms over the last century, we show that government deficit financing crowds out nonfinancial corporate debt financing and investment. Specifically, an increase in the supply of treasury debt is associated with a significant reduction in corporate leverage, debt issuances, and investment, but no signific...

A dynamic model with credit under limited commitment is constructed, in which limited memory can weaken the effects of punishment for default. This creates an endogenous role for government debt in credit markets. Default can occur in equilibrium, and government debt essentially plays a role as collateral and thus improves borrowers’ incentives. The optimal provision of government debt acts to ...

Empirical analyses of labor tax and public debt processes provide prima facie evidence for imperfect government insurance. This paper considers a model in which the government’s inability to commit to future policies or to report truthfully its spending needs renders government debt markets endogenously incomplete. A method for solving for optimal fiscal policy under these constraints is develo...

The initial government debt-to-GDP ratio and the government’s commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidation is very slow. A faster pace is optimal when the economy starts from a high level of public debt impl...

This paper develops a model of optimal government debt maturity in which the government cannot issue state-contingent bonds and the government cannot commit to fiscal policy. In contrast to an environment with full commitment, there is a tradeoff between the cost of funding and the benefit of hedging. Borrowing long term provides the government with a hedging benefit since the value of outstand...

PBE Type i: Neither default nor political crisis If V ≤ χL, the costs of default are always larger than the costs of servicing the debt even for the benevolent government. Then in equilibrium, the government proposes to service the debt, which is accepted by the representative agent. Hence the debt is repaid and political crisis is avoided. Neither the benevolent government nor the self interes...

The postwar literature on public debt has been concerned primarily with two related issues: (1)whether public debt allows the cost of government to be shifted forward onto future generations and (2) whether the creation of public debt involves a positive net wealth effect. The development of this literature can be portrayed chronologically by three works, even though many authors have contribut...