Explaining Movements in Government Debt / Tatiana Kirsanova, Eric M. Leeper, Campbell B. Leith, Ding Liu.

Format:

Book

Author/Creator:

Kirsanova, Tatiana.

Contributor:

Leeper, Eric M.

Leith, Campbell B.

Liu, Ding.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w35222.

NBER working paper series no. w35222

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2026.

Summary:

Standard New Keynesian models with time-consistent policy predict minimal debt responses to conventional shocks, as a debt stabilization bias dominates tax-smoothing motives. We show that two mechanisms can generate debt movements of the magnitude observed in the data: increases in policymaker myopia and declines in real interest rates, such as during flight-to-safety episodes. Other potential drivers--changes in markups, debt maturity, government transfers, or large recessions--cannot account for such fluctuations.

Notes:

May 2026.

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