Fiscal Deficits, Public Debt, and Sovereign Bond Yields
Fiscal Deficits, Public Debt, and Sovereign Bond Yields

Author: Mr. Manmohan S. Kumar

Publisher: International Monetary Fund

Published: 2010-08-01

Total Pages: 31

ISBN-13: 1455201677

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The recent sharp increase in fiscal deficits and government debt in many countries raises questions regarding their impact on long-term sovereign bond yields. While economic theory suggests that this impact is likely to be adverse, empirical results have been less clear cut, have generally ignored nonlinear effects of deficits and debt through some other key determinants of yields, and have been mostly confined to advanced economies. This paper reexamines the impact of fiscal deficits and public debt on long-term interest rates during 1980 - 2008, taking into account a wide range of country-specific factors, for a panel of 31 advanced and emerging market economies. It finds that higher deficits and public debt lead to a significant increase in long-term interest rates, with the precise magnitude dependent on initial fiscal, institutional and other structural conditions, as well as spillovers from global financial markets. Taking into account these factors suggests that large fiscal deficits and public debts are likely to put substantial upward pressures on sovereign bond yields in many advanced economies over the medium term.

The Liquidation of Government Debt
The Liquidation of Government Debt

Author: Ms.Carmen Reinhart

Publisher: International Monetary Fund

Published: 2015-01-21

Total Pages: 47

ISBN-13: 1498338380

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High public debt often produces the drama of default and restructuring. But debt is also reduced through financial repression, a tax on bondholders and savers via negative or belowmarket real interest rates. After WWII, capital controls and regulatory restrictions created a captive audience for government debt, limiting tax-base erosion. Financial repression is most successful in liquidating debt when accompanied by inflation. For the advanced economies, real interest rates were negative 1⁄2 of the time during 1945–1980. Average annual interest expense savings for a 12—country sample range from about 1 to 5 percent of GDP for the full 1945–1980 period. We suggest that, once again, financial repression may be part of the toolkit deployed to cope with the most recent surge in public debt in advanced economies.

Fiscal Policy, Public Debt and the Term Structure of Interest Rates
Fiscal Policy, Public Debt and the Term Structure of Interest Rates

Author: Roland Demmel

Publisher: Springer Science & Business Media

Published: 2012-12-06

Total Pages: 284

ISBN-13: 3642585957

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The introduction of the thesis consists of four parts: first, we motivate our chosen macroeconomic setting by looking at some real world phenomena. For a better understanding of these phenomena, we argue that the mutual dynamic interactions between flScal policy and financial markets need to be closely examined in a macroeconomic framework. Second, we review different strands of the economic literature in order to show that most of the literature has so far exclusively concentrated either on fmancial market dynamics or on flScal policy issues. We conclude that a more integrated model setting is called for in order to explain the dynamic interactions observed in reality. Third, we discuss at length the economic assumptions underlying our model. This avoids multiple repetition later on. Finally, we outline the structure of the thesis and the objectives we pursue in the different chapters. 1. 1 Motivation Fiscal policy and financial market reactions are increasingly receiving world wide attention. The most recent examples are the Maastricht criteria about flScal control, the South-East Asia financial crisis and the resulting IMF policy stance, the high level of public debt in developed and developing countries and the effect on interest rates and economic growth. In contrast to the still underdeveloped theoretical literature on these dynamic links, finding empirical evidence that supports the existence of these links is not a very hard task.

Public Debt
Public Debt

Author: Giuseppe Eusepi

Publisher: Edward Elgar Publishing

Published: 2017-06-30

Total Pages: 285

ISBN-13: 1786438046

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Over the past decades, economists have witnessed with growing uneasiness their failure to explain the ballooning of public debt in most countries. This book provides an alternative orientation that explains why concepts of public debt that are relevant for authoritarian regimes are not relevant for democratic regimes. Using methodological individualism and micro-economics, this book overcomes flaws inherent in the standard macro approach, according to which governments manipulate public debt to promote systemic stability. This unique analysis is grounded in the writings of Antonio de Viti de Marco, injecting current analytical contributions and formulations into the framework to offer a forthright insight into public debt and political economy.

Public Debt Through the Ages
Public Debt Through the Ages

Author: Mr.Barry J. Eichengreen

Publisher: International Monetary Fund

Published: 2019-01-15

Total Pages: 60

ISBN-13: 1484392892

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We consider public debt from a long-term historical perspective, showing how the purposes for which governments borrow have evolved over time. Periods when debt-to-GDP ratios rose explosively as a result of wars, depressions and financial crises also have a long history. Many of these episodes resulted in debt-management problems resolved through debasements and restructurings. Less widely appreciated are successful debt consolidation episodes, instances in which governments inheriting heavy debts ran primary surpluses for long periods in order to reduce those burdens to sustainable levels. We analyze the economic and political circumstances that made these successful debt consolidation episodes possible.

Public Debt and Growth
Public Debt and Growth

Author: Jaejoon Woo

Publisher: International Monetary Fund

Published: 2010-07-01

Total Pages: 49

ISBN-13: 145520157X

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This paper explores the impact of high public debt on long-run economic growth. The analysis, based on a panel of advanced and emerging economies over almost four decades, takes into account a broad range of determinants of growth as well as various estimation issues including reverse causality and endogeneity. In addition, threshold effects, nonlinearities, and differences between advanced and emerging market economies are examined. The empirical results suggest an inverse relationship between initial debt and subsequent growth, controlling for other determinants of growth: on average, a 10 percentage point increase in the initial debt-to-GDP ratio is associated with a slowdown in annual real per capita GDP growth of around 0.2 percentage points per year, with the impact being somewhat smaller in advanced economies. There is some evidence of nonlinearity with higher levels of initial debt having a proportionately larger negative effect on subsequent growth. Analysis of the components of growth suggests that the adverse effect largely reflects a slowdown in labor productivity growth mainly due to reduced investment and slower growth of capital stock.

NBER Macroeconomics Annual 2004
NBER Macroeconomics Annual 2004

Author: Mark Gertler

Publisher: Mit Press

Published: 2005

Total Pages: 489

ISBN-13: 9780262072632

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The NBER Macroeconomics Annual presents pioneering work in macroeconomics by leading academic researchers addressed to a broad audience of public policymakers as well as to the academic community. Each paper is followed by comments and discussion to give a more complete context for the views expressed. The 2004 edition features a range of papers aimed at providing coherent and informative answers to such important questions as the effect of federal government debt on interest rates; the stochastic dimension of the American economy; the role of technology as a source of economic fluctuations; and the interaction of capital flows, fiscal policy, and monetary policies in developing countries, emerging markets, and OECD countries.

Coordination of Monetary and Fiscal Policies
Coordination of Monetary and Fiscal Policies

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 1998-03-01

Total Pages: 33

ISBN-13: 1451844239

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Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.

Revised Guidelines for Public Debt Management
Revised Guidelines for Public Debt Management

Author: International Monetary Fund,

Publisher: International Monetary Fund

Published: 2015-03-11

Total Pages: 40

ISBN-13: 1498330665

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The Revised Guidelines for Public Debt Management have been developed as part of a broader work program undertaken by the IMF and the World Bank to strengthen the international financial architecture, promote policies and practices that contribute to financial stability and transparency, and reduce countries external vulnerabilities.