Optimal Debt Policy Under Asymmetric Risk /

In the paper we show that, most of the time, smooth reduction in the debt ratio is optimal for tax-smoothing purposes when fiscal risks are asymmetric, with large debt-augmenting shocks more likely than commensurate debt reducing shocks. Asymmetric risks are a feature of 200 years of data for the U....

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Bibliografiske detaljer
Hovedforfatter: Escolano, Julio
Andre forfattere: Gaspar, Vitor
Format: Tidsskrift
Sprog:English
Udgivet: Washington, D.C. : International Monetary Fund, 2016.
Serier:IMF Working Papers; Working Paper ; No. 2016/178
Online adgang:Full text available on IMF
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245 1 0 |a Optimal Debt Policy Under Asymmetric Risk /  |c Julio Escolano, Vitor Gaspar. 
264 1 |a Washington, D.C. :  |b International Monetary Fund,  |c 2016. 
300 |a 1 online resource (21 pages) 
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506 |a Electronic access restricted to authorized BRAC University faculty, staff and students 
520 3 |a In the paper we show that, most of the time, smooth reduction in the debt ratio is optimal for tax-smoothing purposes when fiscal risks are asymmetric, with large debt-augmenting shocks more likely than commensurate debt reducing shocks. Asymmetric risks are a feature of 200 years of data for the U.S. and the U.K.: rare but recurrent large surges of the debt-to-GDP ratio, followed by very gradual but persistent declines over long periods. More informal evidence from many other countries suggests that asymmetry is a general feature of fiscal shocks. The gradual smooth reduction in the public debt to GDP ratio is not a response to past developments. Instead it is optimal given recurrent fiscal risks and the empirical characteristics of fiscal shocks. The behavior of the debt-to-GDP ratio in the U.K. and the U.S. seems roughly compatible with the prescriptions of the tax-smoothing model. 
538 |a Mode of access: Internet 
700 1 |a Gaspar, Vitor. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 2016/178 
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