Inflation and the Maturity Structure of Nominal Debt

26 Pages Posted: 19 Dec 2010

See all articles by Jihad C. Dagher

Jihad C. Dagher

International Monetary Fund (IMF) - Research Department

Date Written: February 6, 2010

Abstract

Episodes of high inflation are generally accompanied by a shortening of the maturity of nominal debt contracts. This paper develops a multiperiod general equilibrium model with incomplete markets to study the relationship between inflation and the maturity structure of nominal bonds. The model shows that under the presence of a small risk of price stabilization, high inflation can lead to a significant shortening of the maturities of nominal bonds traded among agents, yielding a negative relationship between inflation and maturity. The paper shows evidence of this negative correlation from Turkish data on Treasury auctions.

Keywords: Inflation, Debt Maturity, General Equilibrium, Stabilization Risk

JEL Classification: D50, D52, E44, E50, F34, G10

Suggested Citation

Dagher, Jihad C., Inflation and the Maturity Structure of Nominal Debt (February 6, 2010). Available at SSRN: https://ssrn.com/abstract=1728302 or http://dx.doi.org/10.2139/ssrn.1728302

Jihad C. Dagher (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
51
Abstract Views
810
rank
411,076
PlumX Metrics