Debt intolerance: Threshold level and composition

Hideaki Matsuoka

No e147, Working Papers from Tokyo Center for Economic Research

Abstract: Fiscal vulnerabilities depend on both the level and composition of government debt. This study examines the role of debt thresholds and debt composition in driving the non-linear behavior of long-term interest rates through a novel approach, a panel smooth transition regression with a general logistic model. The main findings are threefold. First, the impact of the expected public debt level on interest rates rises exponentially when the share of foreign private holdings exceeds approximately 20 percent of government debt denominated in local currency. Second, if the public debt level exceeds a certain level, an increase in foreign private holding of government debt could raise in interest rates, offsetting the downward pressure from higher market liquidity. Third, out-of-sample forecasts of this novel non-linear model are more accurate than those of previous methods.

Pages: 40 pages
Date: 2020-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.tcer.or.jp/wp/pdf/e147.pdf (application/pdf)

Related works:
Journal Article: Debt Intolerance: Threshold Level and Composition (2022)
Working Paper: Debt intolerance: Threshold level and composition (2020)
Working Paper: Debt Intolerance: Threshold Level and Composition (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcr:wpaper:e147

Access Statistics for this paper

More papers in Working Papers from Tokyo Center for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ().