The impact of the stock and maturity of government debt on longer-term bond yields matters for monetary policy. This article, published in VOX, assesses the magnitude and relative importance of overall bond supply and maturity effects on longer-term US Treasury interest rates using data from 1976 to 2008. Both factors have a significant impact on both forwards and term premia, but maturity of public debt appears to matter more. The results have implications for exit from unconventional policies, and also for the links between monetary and fiscal policy and debt management. Read the full article here.
by Professor Jagjit Chadha, School of Economics at the University of Kent