Optimal Government Debt Maturity ∗

@inproceedings{Debortoli2014OptimalGD,
  title={Optimal Government Debt Maturity ∗},
  author={Davide Debortoli and Ricardo Cavaco Nunes and Pierre Yared},
  year={2014}
}
This paper develops a model of optimal government debt maturity in which the government cannot issue state-contingent bonds and cannot commit to fiscal policy. If the government can perfectly commit, it fully insulates the economy against government spending shocks by purchasing short-term assets and issuing long-term debt. These positions are quantitatively very large relative to GDP and do not need to be actively managed by the government. Our main result is that these conclusions are not… CONTINUE READING

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