Skip to main content Skip to secondary navigation
Publication

The Value of Government Debt

The market value of government debt equals the present discounted value of primary surpluses. Applying present value decompositions from asset pricing to this valuation equation, I find that half of the variation in the market value of debt to GDP ratio corresponds to varying forecasts of future primary surpluses, and half to varying discount rates. Variation in expected growth rates is unimportant.

Author(s)
John Cochrane
Publication Date
August, 2019