Public Debt in Advanced Economies and its Spillover Effectson Long-Term Yields

August 1, 2011

Preview Citation

Format: Chicago

Emre Alper, and Lorenzo Forni. Public Debt in Advanced Economies and its Spillover Effectson Long-Term Yields, (USA: International Monetary Fund, 2011) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Several models establish a positive association between public debt ratios and long-term real yields, but the empirical evidence is not always conclusive. We reconsider this issue, focusing in particular on possible spillover effects of large advanced economies' debt levels to other economies' borrowing yields, especially in emerging markets. We extend the existing literature by using real time expectations of fiscal and other macroeconomic variables for a large sample of advanced and emerging economies. We show that an increase in the public debt levels of large advanced economies - especially the United States - spills over to both emerging markets and other advanced economies' long-term real yields and that this effect is significant at the current levels of advanced economies' debt ratios.

Subject: Domestic debt, Financial services, Government debt management, Long term interest rates, Public debt, Public financial management (PFM), Real interest rates

Keywords: Debt, Debt level, Debt ratio, Debt ratio level, Debt ratio value, Debt to GDP ratio, Domestic debt, EMBI, EMEs' yield, Global, Government debt management, Increases in advanced economies public debt debt ratio, Interest rate channel, Long term interest rates, Long-term real rates, Public debt, Public debt debt ratio, Rate, Real interest rates, Real rate, Spillover effect, Spillovers, WP, Yield

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/210
Stock No:

WPIEA2011210
ISBN:

9781463902209
ISSN:

1018-5941

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