Managing the Public Debt in Fiscal Stabilizations: The Evidence

31 Pages Posted: 25 Jul 2000 Last revised: 1 Oct 2022

See all articles by Alessandro Missale

Alessandro Missale

University of Milan - Department of Business Policy and Economics

Francesco Giavazzi

National Bureau of Economic Research (NBER); University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); Centre for Economic Policy Research (CEPR)

Pierpaolo Benigno

University of Bern - Department of Economics; Einaudi Institute for Economics and Finance (EIEF)

Multiple version iconThere are 2 versions of this paper

Date Written: December 1997

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

Missale, Alessandro and Giavazzi, Francesco and Giavazzi, Francesco and Benigno, Pierpaolo, Managing the Public Debt in Fiscal Stabilizations: The Evidence (December 1997). NBER Working Paper No. w6311, Available at SSRN: https://ssrn.com/abstract=226066

Alessandro Missale (Contact Author)

University of Milan - Department of Business Policy and Economics ( email )

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Francesco Giavazzi

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER) ( email )

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+39 02 5836 3302 (Fax)

Centre for Economic Policy Research (CEPR)

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Pierpaolo Benigno

University of Bern - Department of Economics ( email )

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Bern, CH-3001
Switzerland

Einaudi Institute for Economics and Finance (EIEF) ( email )

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Rome, 00187
Italy

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