Richmond Fed paper examines sovereign debt duration
Failing to account for the problem of ‘debt dilution' may be leading governments to issue longer-term sovereign debt than they otherwise would, according to a working paper published by the Federal Reserve Bank of Richmond.
The paper – Sudden Stops, Time Inconsistency and the Duration of Sovereign Debt, by Juan Carlos Hatchondo and Leonardo Martinez – identifies the main trade-off that governments face when managing sovereign debt.
Governments face "significant variations in the cost at which
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