Estimates are presented for the impact of debt accumulation by the central and subcentral governments of a federation on the creditworthiness of other federation member governments. The estimates, calculated using an ordered probit model and Canadian provincial data, indicate that debt...

An explanation for the widely-observed phenomenon of home country asset preference is provided by the existence of government debt. Domestic government debt implies future taxes for domestic residents. Since no market exists for the statutory obligation to pay taxes, the present value of future...