Risk premia increase with government debt. Debt-to-GDP ratios positively predict stock returns at short and long horizons in the U.S. and other advanced economies. Higher debt is also associated with higher bond premia and lower risk-free rates. Major government debt theories (liquidity, safety, crowding out) either do not address or are inconsistent with these findings. New evidence suggests that the increased risk premia provide compensation for larger fiscal risk; during periods of elevated debt, fiscal policy becomes more uncertain and less effective and can lead to debt crises. I quantify these mechanisms in an equilibrium model.
Prof. Yang LIU
Finance
Associate Professor
2859 1050
KK 1005
Publications
1May
1 May 2023
Journal of Monetary Economics
4Oct
傳統市場理論認為,貨幣滙率是反映經濟強弱的晴雨表。不過,香港大學經管學院金融學助理教授劉洋的研究發現,滙率浮動與經濟狀況和通貨膨脹等相關性很低,反之與金融市場的流動性,以及政府施行政策是否穩定有更大關係。 流動性與政策更具影響力 劉洋接受訪問時指出,其研究發現滙率是隨機遊走
4 Oct 2021
Faculty