Optimal Cash Buffers of Sovereign Debt Management Offices

52 Pages Posted: 27 Jan 2018 Last revised: 25 Aug 2019

See all articles by Alexander Eisl

Alexander Eisl

Vienna University of Economics and Business

Christian Ochs

Vienna University of Economics and Business - Department of Finance, Accounting & Statistics

Stefan Pichler

WU - Vienna University of Economics and Business - Department of Finance, Accounting and Statistics; VGSF (Vienna Graduate School of Finance)

Date Written: August 18, 2019

Abstract

We model a sovereign debt manager who has a prediction of the budget deficit and needs to raise debt at the beginning of the budget period. In this setting, the sovereign may issue debt in excess of expected funding needs – a precautionary cash buffer – as a measure of self-insurance against the potential cost of inter-temporal funding. Based on budget deficit predictions that are reported under the EU’s Stability and Growth Pact and Excessive Deficit Procedure, as well as historical budget deficit data, we provide an empirical assessment of optimal cash buffers for a panel of EU countries.

Keywords: Sovereign Debt Management, Capital Buffers, Cash Management

JEL Classification: G12, H62, H63, H68

Suggested Citation

Eisl, Alexander and Ochs, Christian and Pichler, Stefan, Optimal Cash Buffers of Sovereign Debt Management Offices (August 18, 2019). Available at SSRN: https://ssrn.com/abstract=3110048 or http://dx.doi.org/10.2139/ssrn.3110048

Alexander Eisl

Vienna University of Economics and Business ( email )

Heiligenstadter-Strasse 46-48
Vienna, Wien A-1190
Austria

Christian Ochs (Contact Author)

Vienna University of Economics and Business - Department of Finance, Accounting & Statistics ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Stefan Pichler

WU - Vienna University of Economics and Business - Department of Finance, Accounting and Statistics ( email )

Heiligenstaedter Strasse 46-48
Wien 1190
Austria

VGSF (Vienna Graduate School of Finance) ( email )

Heiligenstaedter Strasse 46-48
Vienna, 1190
Austria

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