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September 1977

Debt-Management Policy and the Own Price Elasticity of Demand for U.S. Government Notes and Bonds

by Richard W. Lang and Robert H. Rasche

Debt-management policies of the U.S. Government are actions which affect the composition of the publicly held Federal debt. Such actions include operations of both the U.S. Treasury and the Federal Reserve. As a macroeconomic policy tool, discretionary debt-management policy attempts to affect economic activity in a specific way by altering the maturity structure of the Government’s debt. The effectiveness of such a policy depends upon the extent to which changes in the composition of the debt affect the structure of interest rates, and the extent to which changes in the structure of interest rates affect economic activity.