This course seeks to hand students an analytical and institutional framework to think about government debt sustainability in mature economies like the U.S. These economies are currently facing unprecedented fiscal headwinds. We introduce the basics of textbook finance as we build the foundations to price the government debt portfolio and determine its riskiness. We emphasize that the government's cost of funding will depend on its policy choices. We also analyze the proper functioning of government debt markets both from a micro and a macro perspective. We discuss the role of central banks and financial regulators in ensuring that bond markets function properly. Finally, we consider the interaction between central banks and their governments in setting monetary and fiscal policy. Students will be able to address questions like "Are US Treasurys Risky or Safe?", "Is the US on a fiscally sustainable path?" and "Can we run a Sovereign Wealth Fund with borrowed money?"
3 units · Letter or Credit/No Credit
This course seeks to hand students an analytical and institutional framework to think about government debt sustainability in mature economies like the U.S. These economies are currently facing unprecedented fiscal headwinds. We introduce the basics of textbook finance as we build the foundations to price the government debt portfolio and determine its riskiness. We emphasize that the government's cost of funding will depend on its policy choices. We also analyze the proper functioning of government debt markets both from a micro and a macro perspective. We discuss the role of central banks and financial regulators in ensuring that bond markets function properly. Finally, we consider the interaction between central banks and their governments in setting monetary and fiscal policy. Students will be able to address questions like "Are US Treasurys Risky or Safe?", "Is the US on a fiscally sustainable path?" and "Can we run a Sovereign Wealth Fund with borrowed money?"
Offered in Autumn 2025 at Stanford University.