The Term Structure of Interest Rates and the Public Debt Issuance Policy: A Note

12 Pages Posted: 16 Mar 2004

See all articles by Gustavo Piga

Gustavo Piga

University of Rome

Giorgio Valente

Hong Kong Institute for Monetary and Financial Research (HKIMR)

Date Written: March 2004

Abstract

We estimate, using a previously unexploited set of data for the Italian public debt, quarterly yield curves over the period 1970-1996 to test the main implications of the expectations hypothesis theory (EH). Our empirical results show that short-term interest rates move according to the prediction of the EH, though the same cannot be found for long-term interest rates. In addition, using a probit model, we investigate the public debt issuance policy. We find and interpret a significant relationship between the slope of the yield curve and the probability of an increase in the aggregate duration of the outstanding debt.

Keywords: Term Structure of Interest Rates, Expectations Hypothesis, Public Debt Management

JEL Classification: H63, E44, E58, E61

Suggested Citation

Piga, Gustavo and Valente, Giorgio, The Term Structure of Interest Rates and the Public Debt Issuance Policy: A Note (March 2004). CEIS Working Paper No. 49. Available at SSRN: https://ssrn.com/abstract=517882 or http://dx.doi.org/10.2139/ssrn.517882

Gustavo Piga

University of Rome ( email )

Via di Tor Vergata
Rome, Lazio
Italy

Giorgio Valente (Contact Author)

Hong Kong Institute for Monetary and Financial Research (HKIMR) ( email )

One Pacific Place, 10th Floor
88 Queensway
Hong Kong
China

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