Confidence Crises and Public Debt Management
AbstractUnder free capital mobility, confidence crises can lead to devaluations even when fixed exchange rates are viable, if fiscal authorities can obtain temporary money financing of deficits. During a crisis domestic interest rates increase, reflecting the expected devaluation. Rather than selling debt at punitive rates, fiscal authorities will turn to temporary money financing, leading to equilibria with positive probability of devaluation. These equilibria can be ruled out if the amount of debt maturing during the crisis is sufficiently small - a condition that can be met by reducing the stock of public debt, lengthening its average maturity and/or smoothing the time distribution of maturing issues.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 318.
Date of creation: May 1989
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Francesco Giavazzi & Marco Pagano, 1989. "Confidence Crises and Public Debt Management," Working Papers 73, Dipartimento Scienze Economiche, Universita' di Bologna.
- Francesco Giavazzi & Marco Pagano, 1989. "Confidence Crises and Public Debt Management," NBER Working Papers 2926, National Bureau of Economic Research, Inc.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.