Stock-Flow Adjustments, Public Debt Management and Interest Costs

37 Pages Posted: 2 Aug 2022

See all articles by Floriana Cerniglia

Floriana Cerniglia

affiliation not provided to SSRN

Fabrizio Casalin

Catholic University of Lille - IESEG School of Management

Enzo Dia

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Abstract

We find evidence of a non-linear relationship between stock-flow adjustmentsand debt levels that is different for low- and high-debt economies. Stockflowadjustments are largely a by-product of efficient public debt management.We study an alternative measure of interest costs on debt — dubbedshadow interest costs — that accounts for the effects of stock-flow adjustments,allowing stock-flow consistent analyses of debt dynamics. Shadow interest costsare larger, more volatile, and sensitive to changes in macroeconomic conditionsthan standard interest costs. The dynamics of shadow interest costs is largelyshaped by common global factors that mirror U.S. interesse rates.

Keywords: E62, H53, H63, I38

Suggested Citation

Cerniglia, Floriana and Casalin, Fabrizio and Dia, Enzo, Stock-Flow Adjustments, Public Debt Management and Interest Costs. Available at SSRN: https://ssrn.com/abstract=4179212 or http://dx.doi.org/10.2139/ssrn.4179212

Floriana Cerniglia (Contact Author)

affiliation not provided to SSRN ( email )

No Address Available

Fabrizio Casalin

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, 92800
France

Enzo Dia

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

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

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

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