Buybacks of Domestic Debt in Public Debt Management

U of Siena, Economics Working Paper No. 347

39 Pages Posted: 12 Oct 2002

See all articles by Silvia Marchesi

Silvia Marchesi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES); University of Milan - Centro Studi Luca d'Agliano (LdA)

Date Written: April 2002

Abstract

This paper shows how public debt repurchases can be used to reduce the costs of debt service, under the hypothesis of asymmetry of information between the government and the private sector. At the beginning of a fiscal stabilisation, for example, a government typically does not enjoy full credibility among investors and interest rates could incorporate excessive risk premia, reflecting this lack of credibility. The idea of this paper is that buybacks could be used to eliminate unfair risk premia since they can signal the government commitment to an announced policy.

Keywords: Buybacks, public debt management

JEL Classification: D82, H63

Suggested Citation

Marchesi, Silvia, Buybacks of Domestic Debt in Public Debt Management (April 2002). U of Siena, Economics Working Paper No. 347, Available at SSRN: https://ssrn.com/abstract=315363 or http://dx.doi.org/10.2139/ssrn.315363

Silvia Marchesi (Contact Author)

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

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Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

University of Milan - Centro Studi Luca d'Agliano (LdA)

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Milano, Mi 20122
Italy

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