Governments have traditionally financed their activities by selling nominal debt of various maturities. A long standing question concerns the optimal management of these liabilities. Many contributors have posited a role for short term nominal debt, either on cost minimization grounds or on tax...

Standard theory prescribes that the government hedge against shocks to its expenditures by generating total debt portfolio returns with a negative beta on government expenditure innovations. This paper asseses how well the government manages its debt portfolio against the benchmark government...