This paper provides a recursive empirical analysis of the scope for cost minimization in public debt management when the debt manager faces a given short-term interest rate dictated by monetary policy as well as risk and market impact constraints. It simulates the 'real-time' interest costs of alternative portfolios for UK government debt between April 1985 and March 2000. These portfolios are constructed using forecasts of return spreads based on a recursive modelling procedure. While we find statistically significant evidence of predictability, the interest cost savings are quite small when portfolio shares are constrained to lie within historical bounds.

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Journal Oxford Bulletin of Economics and Statistics
Coe, P, Pesaran, M.H. (M. Hashem), & Vahey, S.P. (Shaun P.). (2005). The cost effectiveness of the UK's sovereign debt portfolio. Oxford Bulletin of Economics and Statistics, 67(4), 467–496. doi:10.1111/j.1468-0084.2005.00128.x