9/1/2023 0 Comments Crisis of the confederationThese risks may partly be hedged issuing longer term maturities next to short-term debt. This is associated with deadweight costs of increasing taxation. For instance, predominantly issuing short-term debt to reduce servicing costs can increase the level and volatility of tax rates when short-term rates rise. In so doing, treasuries face the trade-off between the debt servicing cost against potential costs of roll over and interest rate risk. Debt management is about deciding which debt instruments the government uses to finance itself over time. This paper empirically analyzes the Confederation’s debt management based on new data vintages on marketable debt emissions and total outstanding debt from 1970 on.
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