Managing the Public Debt in Fiscal Stabilizations: The Evidence
31 Pages Posted: 25 Jul 2000 Last revised: 1 Apr 2022
Date Written: December 1997
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.
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