Fiscal insurance during financial distress: the case of Belgian sovereign debt in the 21st century
Fiscal insurance during financial distress: the case of Belgian sovereign debt in the 21st century
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We empirically test the theoretical hypothesis that long term bonds offer governments fiscal insurance in times of crisis, analyzing Belgian sovereign debt dynamics during the 21st century. We use a novel data set of monthly prices and quantities for bonds in circulation between 2000 and 2022. We calculate total market value of debt and one- period holding returns, capturing the funding cost in the government’s inter temporal budget constraint. The main findings of the study indicate a positive co movement between bond prices and government net funding requirement during periods of financial distress, suggesting a limited role of long bonds in fiscal insurance.
Examinamos empíricamente la hipótesis teórica que bonos de larga duración ofrecen seguro fiscal a gobiernos en tiempos de crisis, analizando la deuda soberana Belga durante el siglo XXI. Utilizamos una novedosa base de datos de precios y cantidades de bonos en circulación entre 2000 y 2022. Calculamos valor de mercado total de la deuda y rendimientos de tenencia de un período, capturando costos de financiamiento en la limitación presupuestaria inter-temporal del gobierno. Encontramos co movimiento positivo entre precios de bonos y requerimientos de financiamiento gubernamentales netos durante períodos de crisis, sugiriendo un papel limitado de bonos largos en el seguro fiscal.Descripció
Treball fi de màster de: Master's Degree in Specialized Economic Analysis: Macroeconomic Policy and Financial Markets Program. Curs 2022-2023
Tutors: Hugo Rodríguez-Mendizábal i Luca GambettiCol·leccions
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