A continuous-time model of the term structure of interest rates with fiscal-monetary policy interactions

We study the term structure implications of the fiscal theory of price level determination. We introduce the intertemporal budget constraint of the government in a general equilibrium model in continuous time. Fiscal policy is set according to a simple rule whereby taxes react proportionally to real debt. We show how to solve for the prices of real and nominal zero coupon bonds.

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Year of publication:	2008-10-17
Authors:	Marzo, Massimiliano ; Romagnoli, Silvia ; Zagaglia, Paolo
Institutions:	Suomen Pankki
Subject:	bond pricing \| fiscal policy \| mathematical methods

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Extent:	application/pdf
Series:	Research Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	The text is part of a series Research Discussion Papers The price is Available online only. Number 25/2008 35 pages
Classification:	D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving ; E43 - Determination of Interest Rates; Term Structure Interest Rates ; E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005648966