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The Demand for Long-term Government Securities

In: Portfolio Theory and the Demand for Money

Author

Listed:
  • Neil Thompson

    (University of Salford)

Abstract

In comparison to the plethora of empirical studies on the demand for money function, there have been few attempts to model the non-bank private sector’s demand for long-term government securities (gilts). The issue was analysed by Norton (1969) in a pioneering study, while more recent models of the demand for government bonds are developed in Spencer (1981) and Hoggarth and Ormerod (1985). One of the main issues, analysed by these later studies, is the role and importance of expected capital gains in determining the demand for gilts. In each case, an attempt is made to model the relative return on gilts in each period, defined as the long-term rate of interest plus the ex post capital gain over the period, less the rate of interest obtainable on alternative capital-safe short-term assets.1 Various models are used for this purpose, ranging from simple autoregressive forecasting schemes to more sophisticated ‘structural’ models, which relate the relative return to explicit economic information.

Suggested Citation

  • Neil Thompson, 1993. "The Demand for Long-term Government Securities," Palgrave Macmillan Books, in: Portfolio Theory and the Demand for Money, chapter 9, pages 131-135, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-22827-0_9
    DOI: 10.1007/978-1-349-22827-0_9
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