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.

Additional Metadata
Persistent URL dx.doi.org/10.1111/j.1468-0084.2005.00128.x
Journal Oxford Bulletin of Economics and Statistics
Citation
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