Public debt is an important source of liquidity in economies facing shortages of private credit. It is also a bubble whose current price depends on expectations of what it will buy at future dates. In this article, the author studies how the government must balance the provision of sufficient liquidity against the risk of adverse expectations regarding future debt prices when private liquidity has dried up. The socially optimal balance is captured in a Taylor-like rule that sets a target for real public debt and manages expectations by overreacting to deviations from the target value. Overreaction takes the form of manipulating budget surpluses to absorb excess debt or reverse liquidity shortages. A budget surplus (deficit) is equivalent to an income tax (subsidy) on investors that restrains (raises) their demand for liquid assets.
{"title":"A Taylor Rule for Public Debt","authors":"Costas Azariadis","doi":"10.20955/r.2016.227-238","DOIUrl":"https://doi.org/10.20955/r.2016.227-238","url":null,"abstract":"Public debt is an important source of liquidity in economies facing shortages of private credit. It is also a bubble whose current price depends on expectations of what it will buy at future dates. In this article, the author studies how the government must balance the provision of sufficient liquidity against the risk of adverse expectations regarding future debt prices when private liquidity has dried up. The socially optimal balance is captured in a Taylor-like rule that sets a target for real public debt and manages expectations by overreacting to deviations from the target value. Overreaction takes the form of manipulating budget surpluses to absorb excess debt or reverse liquidity shortages. A budget surplus (deficit) is equivalent to an income tax (subsidy) on investors that restrains (raises) their demand for liquid assets.","PeriodicalId":376458,"journal":{"name":"PSN: Debt (Topic)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115858510","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article explains the relationships among Constitutions, Sovereign Debt policies and Foreign Aid and systemic risk; and why it’s improper to criticize what is termed “Foreign Aid”. During the last fifty years, Foreign Aid has remained functionally, politically and economically the same as, or very similar to both foreign direct investment (“FDI”) and foreign investment (“FI” – ie. foreign investors’ purchases of both corporate securities and government securities within the context of constitutional limitations of state and federal governments). The cash proceeds of such FI and FDI are used for the same purposes as “traditional” foreign aid. Such FDI and FI have boosted the economies of China, Brazil, Mexico, India, Malaysia and South Korea . This article illustrates the perceived differences by comparing the USA and Nigeria with other countries.
{"title":"Complexity, Constitutions, Economic Policy and Foreign Aid","authors":"Michael C. I. Nwogugu","doi":"10.2139/ssrn.2937337","DOIUrl":"https://doi.org/10.2139/ssrn.2937337","url":null,"abstract":"This article explains the relationships among Constitutions, Sovereign Debt policies and Foreign Aid and systemic risk; and why it’s improper to criticize what is termed “Foreign Aid”. During the last fifty years, Foreign Aid has remained functionally, politically and economically the same as, or very similar to both foreign direct investment (“FDI”) and foreign investment (“FI” – ie. foreign investors’ purchases of both corporate securities and government securities within the context of constitutional limitations of state and federal governments). The cash proceeds of such FI and FDI are used for the same purposes as “traditional” foreign aid. Such FDI and FI have boosted the economies of China, Brazil, Mexico, India, Malaysia and South Korea . This article illustrates the perceived differences by comparing the USA and Nigeria with other countries.","PeriodicalId":376458,"journal":{"name":"PSN: Debt (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129059879","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper examines the tail behaviour in financial returns in the Indian debt market.Focussing on the Government securitries Market in India, the study examines whether the behaviour of the tail in the distribution of financial returns exhibit departures from Guaussian assumptions , and if so, what are the implications for risk modeling that assume normal distribution and are widely used in the financial sector. Using three Government Securities Indices ( for residual maturities of 1-3 years, 3-8 years and above 8 years) derived from the NSE Zero coupon yield curve(ZCYC), the present study conducts an empirical exercise to examine the presnce of fat tails in Indian Government Securities Market. The paper conducts tests of normality to determine the existence of fat tails . It further compares the normal distribution based Variance Co-Variance Model of Value at Risk ( VaR) to determine market risk with a Garch model based on conditional volatility. Backtesting using Kupiek POF ( proportion of Failure) test was conducted to judge the model efficiency.The major observation of the paper include (1) the Indian debt market is characterized by presnce of fat tails in the distribution of daily returns; (2) in the presence of thick tails, the parametric VaR that relies on normal distribution produces erroneous assessment of risk; (3) GARCH models give superior market risk estimates in Indian debt market.
{"title":"Fat Tails in Indian Debt Market : Implications for Risk Modelling","authors":"Sunando Roy","doi":"10.2139/ssrn.2802058","DOIUrl":"https://doi.org/10.2139/ssrn.2802058","url":null,"abstract":"The paper examines the tail behaviour in financial returns in the Indian debt market.Focussing on the Government securitries Market in India, the study examines whether the behaviour of the tail in the distribution of financial returns exhibit departures from Guaussian assumptions , and if so, what are the implications for risk modeling that assume normal distribution and are widely used in the financial sector. Using three Government Securities Indices ( for residual maturities of 1-3 years, 3-8 years and above 8 years) derived from the NSE Zero coupon yield curve(ZCYC), the present study conducts an empirical exercise to examine the presnce of fat tails in Indian Government Securities Market. The paper conducts tests of normality to determine the existence of fat tails . It further compares the normal distribution based Variance Co-Variance Model of Value at Risk ( VaR) to determine market risk with a Garch model based on conditional volatility. Backtesting using Kupiek POF ( proportion of Failure) test was conducted to judge the model efficiency.The major observation of the paper include (1) the Indian debt market is characterized by presnce of fat tails in the distribution of daily returns; (2) in the presence of thick tails, the parametric VaR that relies on normal distribution produces erroneous assessment of risk; (3) GARCH models give superior market risk estimates in Indian debt market.","PeriodicalId":376458,"journal":{"name":"PSN: Debt (Topic)","volume":"1 6","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120861511","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：