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Managing the Public Debt in Fiscal Stabilizations: The Evidence

Author

Listed:
  • Alessandro Missale
  • Francesco Giavazzi
  • Pierpaolo Benigno
Abstract
This paper provides evidence on the behavior of public debt managers during fiscal" stabilizations in OECD countries over the last two decades. We find that debt maturity tends to" lengthen the more credible the program, the lower the long-term interest rate and the higher the" volatility of short-term interest rates. We show that this debt issuing strategy is consistent with" optimal debt management if information between the government and private investors is" asymmetric, as is usually the case at the outset of a stabilization attempt when private investors" may lack full confidence in the announced budget cuts.

Suggested Citation

  • Alessandro Missale & Francesco Giavazzi & Pierpaolo Benigno, 1997. "Managing the Public Debt in Fiscal Stabilizations: The Evidence," NBER Working Papers 6311, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6311
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    References listed on IDEAS

    as
    1. John Y. Campbell, 1995. "Some Lessons from the Yield Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 129-152, Summer.
    2. Rudiger Dornbusch, 1991. "Credibility and Stabilization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 837-850.
    3. Calvo, Guillermo A, 1988. "Servicing the Public Debt: The Role of Expectations," American Economic Review, American Economic Association, vol. 78(4), pages 647-661, September.
    4. Alessandro Missale & Francesco Giavazzi, 2003. "Public Debt Management in Brazil," Development Working Papers 178, Centro Studi Luca d'Agliano, University of Milano.
    5. Mr. Manmohan S. Kumar & Mr. Pablo Emilio Guidotti, 1991. "Domestic Public Debt of Externally Indebted Countries," IMF Occasional Papers 1991/005, International Monetary Fund.
    6. Bohn, Henning, 1990. "A positive theory of foreign currency debt," Journal of International Economics, Elsevier, vol. 29(3-4), pages 273-292, November.
    7. Francesco Giavazzi & Marco Pagano, 1989. "Confidence Crises and Public Debt Management," NBER Working Papers 2926, National Bureau of Economic Research, Inc.
    8. Alesina, Alberto F & Prati, Alessandro & Tabellini, Guido, 1989. "Public Confidence and Debt Management: A Model and a Case Study of Italy," CEPR Discussion Papers 351, C.E.P.R. Discussion Papers.
    9. Missale, Alessandro & Blanchard, Olivier Jean, 1994. "The Debt Burden and Debt Maturity," American Economic Review, American Economic Association, vol. 84(1), pages 309-319, March.
    10. Bohn, Henning, 1990. "Tax Smoothing with Financial Instruments," American Economic Review, American Economic Association, vol. 80(5), pages 1217-1230, December.
    11. Bohn, Henning, 1988. "Why do we have nominal government debt?," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 127-140, January.
    12. Marcello de Cecco & Lorenzo Pecchi & Gustavo Piga (ed.), 1997. "Managing Public Debt," Books, Edward Elgar Publishing, number 1172.
    13. Robert J. Barro, 1995. "Optimal Debt Management," NBER Working Papers 5327, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Maria Manuel Campos & Cristina Checherita-Westphal, 2019. "Economic consequences of high public debt and challenges ahead for the euro area," Working Papers o201904, Banco de Portugal, Economics and Research Department.
    2. repec:hal:spmain:info:hdl:2441/2545 is not listed on IDEAS
    3. Paola Veroni, 2001. "Dix ans de politique budgétaire au service de l'euro : l'exemple italien," SciencePo Working papers Main hal-01016956, HAL.
    4. Drudi, Francesco & Prati, Alessandro, 2000. "Signaling fiscal regime sustainability," European Economic Review, Elsevier, vol. 44(10), pages 1897-1930, December.
    5. Hjelm, Goran, 2002. "Is private consumption growth higher (lower) during periods of fiscal contractions (expansions)?," Journal of Macroeconomics, Elsevier, vol. 24(1), pages 17-39, March.
    6. Thordur Jonasson & Mr. Michael G. Papaioannou, 2018. "A Primer on Managing Sovereign Debt-Portfolio Risks," IMF Working Papers 2018/074, International Monetary Fund.
    7. repec:bla:scandj:v:104:y:2002:i:3:p:423-41 is not listed on IDEAS
    8. Burriel, Pablo & Checherita-Westphal, Cristina & Jacquinot, Pascal & Stähler, Nikolai & Schön, Matthias, 2020. "Economic consequences of high public debt: evidence from three large scale DSGE models," Working Paper Series 2450, European Central Bank.
    9. Silvia Marchesi, 2006. "Buybacks of domestic debt in public debt management," The European Journal of Finance, Taylor & Francis Journals, vol. 12(5), pages 379-400.
    10. Paola Veroni, 2001. "Dix ans de politique budgétaire au service de l'euro : l'exemple italien," Post-Print hal-01016956, HAL.
    11. António Afonso, 2001. "Non-Keynesian Effects of Fiscal Policy in the EU-15," Working Papers Department of Economics 2001/07, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    12. repec:spo:wpecon:info:hdl:2441/2545 is not listed on IDEAS
    13. repec:hal:wpspec:info:hdl:2441/2545 is not listed on IDEAS
    14. Fiess, Norbert, 2003. "Capital flows, country risk, and contagion," Policy Research Working Paper Series 2943, The World Bank.
    15. repec:spo:wpmain:info:hdl:2441/2545 is not listed on IDEAS

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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