Managing the maturity structure of government debt

It is known that a government can implement the optimal complete-market Ramsey allocations by issuing non-contingent bonds of different maturities. The implied optimal maturity structure is timeand state-invariant—i.e. it is not actively managed. I construct a model where the Ramsey allocations can be implemented with active management of the maturity structure. In a numerical example that reflects the time-series properties of the British government’s expenditure during the 18th century, its historic pattern of maturity management is replicated. r 2006 Elsevier B.V. All rights reserved