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:	2008-07-29
Authors:	Marzo, Massimiliano ; Romagnoli, Silvia ; Zagaglia, Paolo
Institutions:	Nationalekonomiska institutionen, Stockholms Universitet
Subject:	Bond Pricing \| Fiscal Policy \| Mathematical Methods

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Extent:	application/pdf
Series:	Research Papers in Economics.
Type of publication:	Book / Working Paper
Language:	English
Notes:	The text is part of a series Research Papers in Economics Number 2008:6 27 pages
Classification:	D90 - Intertemporal Choice and Growth. General ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005207072