European Parliament Library

How Important are Debt and Growth Expectations for Interest Rates?, Sohrab Rafiq

Abstract
This paper uses a dataset on private-sector risk aversion as well as expectations of long-run growth and debt to explain trends in implied forward rates on government bonds in the G-7 countries. The results show, consistent with the literature, that a one-percent rise in the long-run projected debt-to-GDP ratio causes an increase in bond yields of a relatively modest 1-to-6 basis points. Shocks to growth expectations and risk aversion have been comparatively more successful in explaining the behavior of long-term rates. The findings imply that growth policies rather than long-run projections of fiscal outcomes may be more important in helping influence long-term borrowing costs
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; Appendixes; Figures; I. Introduction; 1. Five Year Growth and Debt Expectations; II. A Debt Expectations and Interest Rate Model; 2. Scatter Plot of Five Year Debt and Growth Expectations; 3. Scatter Plot of Five Year Debt Expectations and the Forward Term Spread; III. Expected Debt and Long-Term Implied Forward Rates; 4. Coefficient Between Forward Rates and Debt Expectations; 5. Size of Macroeconomic Expectation Shocks; IV. Explaining Movements in Forward Interest Rates; A. Can Debt Expectations Explain the Variance of the Yield Curve
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (49 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781475578263

Library Locations

  • EP Library Strasbourg

    7 Place Adrien Zeller, Allée du Printemps, Strasbourg, F-67070, FR
    Borrow
  • EP Library Brussels

    60 rue Wiertz, Brussels, B-1047, BE
    Borrow
  • EP Library Luxembourg

    Rue du Fort Thüngen, Luxembourg, L-1313, LU
    Borrow