What Drives Variation in the U.S. Debt/Output Ratio? The Dogs that Didn't Bark

46 Pages Posted: 11 Oct 2021 Last revised: 12 Sep 2022

See all articles by Zhengyang Jiang

Zhengyang Jiang

Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER)

hlustig@stanford.edu Lustig

Stanford University

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); ABFER

Mindy Z. Xiaolan

University of Texas, Austin - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 2021

Abstract

Higher U.S. government debt/output ratios do not forecast higher future surpluses or lower real returns on Treasurys. Neither future cash flows nor discount rates account for the variation in the current debt/output ratio. The market valuation of Treasurys is surprisingly insensitive to the macro fundamentals. Instead, the future debt/output ratio accounts for most of the variation. Systematic surplus forecast errors may help to account for these findings. Since the start of the GFC, surplus projections have anticipated a large fiscal correction that failed to materialize.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Jiang, Zhengyang and Lustig, hlustig@stanford.edu and Van Nieuwerburgh, Stijn and Xiaolan, Mindy Z., What Drives Variation in the U.S. Debt/Output Ratio? The Dogs that Didn't Bark (October 2021). NBER Working Paper No. w29351, Available at SSRN: https://ssrn.com/abstract=3940037

Zhengyang Jiang (Contact Author)

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States

HOME PAGE: http://sites.google.com/site/jayzedwye/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Hlustig@stanford.edu Lustig

Stanford University

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business ( email )

3022 Broadway
Uris Hall 809
New York, NY New York 10027
United States

HOME PAGE: http://https://www0.gsb.columbia.edu/faculty/svannieuwerburgh/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

ABFER ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Mindy Z. Xiaolan

University of Texas, Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

HOME PAGE: http://sites.google.com/view/mindyxiaolan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
4
Abstract Views
110
PlumX Metrics