Optimal Debt Policy Under Asymmetric Risk

Optimal Debt Policy Under Asymmetric Risk
In the paper we show that, most of the time, smooth reduction in the debt ratio is optimal for tax-smoothing purposes when fiscal risks are asymmetric, with large debt-augmenting shocks more likely than commensurate debt reducing shocks. Asymmetric risks are a feature of 200 years of data for the U.S. and the U.K.: rare but recurrent large... READ MORE...

Publication date: August 2016
ISBN 9781475529845
$18.00

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