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Debt Management Objectives for a Small Open Economy

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  • Boothe, Paul
  • Reid, Bradford
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    Abstract

    In this paper the authors examine the consequences of using cost minimization as the goal of public debt management in a small open economy (SOE). Authorities are assumed to minimize interest costs subject to constraints on their ability to refinance at different maturities, and the information conditioning expectations of future interest rates. A numerical simulation model and a highly disaggregated Canadian data set for the period 1967-87, are used in the analysis. The results presented indicate that, conditional on the SOE assumption, savings do result from following a cost-minimizing strategy. Savings decline as authorities are increasingly constrained in their refinancing choices. However, even the gains in moderately-constrained cases suggest that cost minimization is worthy of serious consideration by authorities. Copyright 1992 by Ohio State University Press.

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    Bibliographic Info

    Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

    Volume (Year): 24 (1992)
    Issue (Month): 1 (February)
    Pages: 43-60

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    Handle: RePEc:mcb:jmoncb:v:24:y:1992:i:1:p:43-60

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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    Cited by:
    1. M. Hashem Pesaran, 2000. "The Cost Efficiency of UK Debt Management: A Recursive Modelling Approach," CESifo Working Paper Series 346, CESifo Group Munich.
    2. Huw Lloyd-Ellis & Xiaodong Zhu, 2004. "Using Financial Market Information to Enhance Canadian Fiscal Policy," Working Papers 1041, Queen's University, Department of Economics.
    3. H. Lloyd-Ellis & Xiaodong Zhu, 1998. "Fiscal Shocks and Fiscal Risk Management," Working Papers lloydell-98-01, University of Toronto, Department of Economics.
    4. De Broeck, Mark, 1997. "The financial structure of government debt in OECD countries: An examination of the time-consistency issue," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 279-301, July.
    5. Khaled Hussein, 2001. "Is Foreign Debt Portfolio Management Efficient in Emerging Economies?," IMF Working Papers 01/121, International Monetary Fund.
    6. Hussein, Khaled A. & de Mello, Luiz Jr., 2001. "Is foreign debt portfolio management efficient in emerging economies?," Journal of Development Economics, Elsevier, vol. 66(1), pages 317-335, October.

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