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A comparative-advantage approach to government debt maturity’, (2015)
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| Venue: | The Journal of Finance |
| Citations: | 27 - 3 self |
BibTeX
@ARTICLE{Greenwood15acomparative-advantage,
author = {Robin Greenwood and Samuel G Hanson and Jeremy C Stein and We and Robert Barro and Markus Brunnermeier and John Campbell and Martin Eichenbaum and Michael Fleming and Ken Froot and Kenneth Garbade and Julio Rotemberg and Andrei Shleifer and Erik Stafford and Adi Sunderam and Matt Weinzierl},
title = {A comparative-advantage approach to government debt maturity’,},
journal = {The Journal of Finance},
year = {2015},
pages = {1683--1722}
}
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Abstract
Abstract We study optimal government debt maturity in a model where investors derive monetary services from holding riskless short-term securities. In a setting where the government is the only issuer of such riskless paper, it trades off the monetary premium associated with short-term debt against the refinancing risk implied by the need to roll over its debt more often. We then extend the model to allow private financial intermediaries to compete with the government in the provision of short-term, money-like claims. We argue that if there are negative externalities associated with private money creation, the government should tilt its issuance more towards short maturities. The idea is that the government may have a comparative advantage relative to the private sector in bearing refinancing risk, and hence should aim to partially crowd out the private sector's use of short-term debt.
