Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • August 2015
  • Article
  • Journal of Finance

A Comparative-Advantage Approach to Government Debt Maturity

By: Robin Greenwood, Samuel G. Hanson and Jeremy C. Stein
  • Format:Print
ShareBar

Abstract

We study optimal government debt maturity in a model where investors derive monetary services from holding riskless short-term securities. In a setting where the government is the only issuer of such riskless paper, it trades off the monetary premium associated with short-term debt against the refinancing risk implied by the need to roll over its debt more often. We then extend the model to allow private financial intermediaries to compete with the government in the provision of short-term, money-like claims. We argue that if there are negative externalities associated with private money creation, the government should tilt its issuance more towards short maturities. The idea is that the government may have a comparative advantage relative to the private sector in bearing refinancing risk and, hence, should aim to partially crowd out the private sector's use of short-term debt.

Keywords

Sovereign Finance; Debt Securities

Citation

Greenwood, Robin, Samuel G. Hanson, and Jeremy C. Stein. "A Comparative-Advantage Approach to Government Debt Maturity." Journal of Finance 70, no. 4 (August 2015): 1683–1722. (2015 Brattle Group Distinguished Paper for an outstanding corporate finance paper published in the Journal of Finance. Internet Appendix Here.)
  • Find it at Harvard
  • Read Now

About The Authors

Robin Greenwood

Finance
→More Publications

Samuel G. Hanson

Finance
→More Publications

More from the Authors

    • February 2023
    • Faculty Research

    Success Academy Charter Schools

    By: Robin Greenwood, Joshua D. Coval, Denise Han, Ruth Page and Dave Habeeb
    • February 2023
    • Faculty Research

    Success Academy Charter Schools

    By: Robin Greenwood, Joshua Coval and Denise Han
    • 2022
    • Faculty Research

    Demand-and-Supply Imbalance Risk and Long-Term Swap Spreads

    By: Samuel G. Hanson, Aytek Malkhozov and Gyuri Venter
More from the Authors
  • Success Academy Charter Schools By: Robin Greenwood, Joshua D. Coval, Denise Han, Ruth Page and Dave Habeeb
  • Success Academy Charter Schools By: Robin Greenwood, Joshua Coval and Denise Han
  • Demand-and-Supply Imbalance Risk and Long-Term Swap Spreads By: Samuel G. Hanson, Aytek Malkhozov and Gyuri Venter
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College