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Why Should Governments Issue Bonds?

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  • Romer, David

Abstract

This paper has three purposes. First, it shows that several recent arguments that the optimal nominal interest rate on government bonds is zero even when second best considerations are accounted for rest on perfect substitutes assumptions. Second, it characterizes the conditions under which the issue of interest-bearing bonds is desirable once these assumptions are relaxed. And third, it shows that these potential microeconomic benefits of bond issue are closely related to traditional macroeconomic analyses of the government's choice between money and bond finance. Copyright 1993 by Ohio State University Press.

Suggested Citation

  • Romer, David, 1993. "Why Should Governments Issue Bonds?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 163-175, May.
    • Handle: RePEc:mcb:jmoncb:v:25:y:1993:i:2:p:163-75
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    Cited by:

    1. Faig, Miquel, 2000. "The Optimal Structure of Liquidity Provided by a Self-Financed Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 746-765, November.
    2. Stacey Schreft & Bruce Smith, 2008. "The social value of risk-free government debt," Annals of Finance, Springer, vol. 4(2), pages 131-155, March.
    3. Amano, Robert A., 1998. "On the Optimal Seigniorage Hypothesis," Journal of Macroeconomics, Elsevier, vol. 20(2), pages 295-308, April.

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