Public Debt in Advanced Economies and its Spillover Effectson Long-Term Yields
August 1, 2011
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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
Pages:
23
Volume:
2011
DOI:
Issue:
210
Series:
Working Paper No. 2011/210
Stock No:
WPIEA2011210
ISBN:
9781463902209
ISSN:
1018-5941
