Long‐Term Interest Rates and Public Debt Maturity

18 Pages Posted: 6 Jun 2017

See all articles by Roel M. W. J. Beetsma

Roel M. W. J. Beetsma

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); European Commission; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Tinbergen Institute; Netspar

Massimo Giuliodori

University of Amsterdam - Faculty of Economics & Econometrics (FEE); Tinbergen Institute

Ieva Sakalauskaite

University of Amsterdam

Multiple version iconThere are 2 versions of this paper

Date Written: July 2017

Abstract

This paper adds to the literature studying how fiscal variables affect long‐term interest rates. Using a sample of sixteen OECD countries over the period 1980–2007, we show that a one‐year increase in the maturity of the public debt lowers the long‐term interest rate by on average 20–30 basis points. This negative effect is found for both static and panel vector autoregressive specifications. Country sample splits suggest that it is present in particular for low‐maturity or high‐inflation countries.

Suggested Citation

Beetsma, Roel M. W. J. and Giuliodori, Massimo and Sakalauskaite, Ieva, Long‐Term Interest Rates and Public Debt Maturity (July 2017). Economica, Vol. 84, Issue 335, pp. 541-558, 2017, Available at SSRN: https://ssrn.com/abstract=2981360 or http://dx.doi.org/10.1111/ecca.12178

Roel M. W. J. Beetsma (Contact Author)

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Tinbergen Institute ( email )

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Ieva Sakalauskaite

University of Amsterdam ( email )

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