Managing the Public Debt in Fiscal Stabilizations: The Evidence

27 Pages Posted: 13 Nov 1997

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: September 10, 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 is the program, the lower is the long-term interest rate and the higher is 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.

JEL Classification: H63, E63

Suggested Citation

Missale, Alessandro and Giavazzi, Francesco and Giavazzi, Francesco and Benigno, Pierpaolo, Managing the Public Debt in Fiscal Stabilizations: The Evidence (September 10, 1997). Available at SSRN: https://ssrn.com/abstract=41449 or http://dx.doi.org/10.2139/ssrn.41449

Alessandro Missale (Contact Author)

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

Via Conservatorio 7
I-20122 Milano
Italy

Francesco Giavazzi

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER) ( email )

Via Roentgen 1
Milan, 20136
Italy
+39 02 5836 3304 (Phone)
+39 02 5836 3302 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Pierpaolo Benigno

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

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

Via Due Macelli, 73
Rome, 00187
Italy

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