Parameterizing Debt Maturity

April 23, 2021

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Format: Chicago

Philip Barrett, and Christopher Johns. Parameterizing Debt Maturity, (USA: International Monetary Fund, 2021) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper examines ways to summarize the maturity structure of public debts using a small number of parameters. We compile a novel dataset of all promised future payments for US and UK government debt from every month since 1869, and more recently for Peru, Poland, Egypt, and Nigeria. We show that there is a unique parametric form which does not arbitrarily restrict debt issuance – portfolios of bonds with exponential coupons. Compared to the most popular alternative, this form 1) more accurately describes changes in debt maturity for these six countries and 2) gives a quite different interpretation of historical debt maturity. Our work can be applied not just to analyze past debt movements, but – because parameter estimates are relatively similar across countries – also for monitoring changes in debt maturity, including in countries where data are partial or incomplete.

Subject: Bonds, Emerging and frontier financial markets, Financial institutions, Financial markets, Public debt, Securities, Securities markets

Keywords: Bonds, Debt issuance, Debt maturity, Debt obligation, Emerging and frontier financial markets, Maturity structure, MLE estimate, Securities, Securities markets

Publication Details

Pages:

74
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/101
Stock No:

WPIEA2021101
ISBN:

9781513582511
ISSN:

1018-5941

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