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Buybacks of Domestic Debt in Public Debt Management

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  • Marchesi, S.
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    Abstract

    In the model a fiscal stabilisation is announced under asymmetry of information between the government and the private investors. The government could be of two types: a dry type and a wet type, according to the amount of spending cuts it decides to make. Private investors may thus lack confidence in the stabilisation program and interest rates would be too high, reflecting this lack of credibility. A dry type which has to finance new spending may want to signal its resolution (type) in order to lower its interest costs and one way to do that would be to repurchase a fraction of the outstanding debt.

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    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp573.pdf
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    Bibliographic Info

    Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 573.

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    Length: 47 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:wrk:warwec:573

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    Keywords: DEBT ; MANAGEMENT ; INFORMATION;

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    References

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    1. Paul R. Krugman, 1988. "Market-Based Debt-Reduction Schemes," NBER Working Papers 2587, National Bureau of Economic Research, Inc.
    2. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(3), pages 251-70, July.
    3. Dornbusch, Rudiger, 1990. "Credibility and Stabilization," CEPR Discussion Papers, C.E.P.R. Discussion Papers 454, C.E.P.R. Discussion Papers.
    4. Alessandro Missale & Francesco Giavazzi & Pierpaolo Benigno, . "Managing the Public Debt in Fiscal Stabilizations: the Evidence," Working Papers 118, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. Drudi, Francesco & Prati, Alessandro, 2000. "Signaling fiscal regime sustainability," European Economic Review, Elsevier, Elsevier, vol. 44(10), pages 1897-1930, December.
    6. Cohen, D. & Verdier, T., 1991. "Secret "Buybacks" of LDC Debt," DELTA Working Papers, DELTA (Ecole normale supérieure) 91-18, DELTA (Ecole normale supérieure).
    7. Bulow, Jeremy & Rogoff, Kenneth, 1991. "Sovereign Debt Repurchases: No Cure for Overhang," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(4), pages 1219-35, November.
    8. Marchesi, Silvia & Thomas, Jonathan P, 1999. "IMF Conditionality as a Screening Device," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(454), pages C111-25, March.
    9. Torsten Persson & Guido Tabellini, . "Political Economics and Macroeconomic Policy," Working Papers 121, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    10. Rodrik, Dani, 1989. "Promises, Promises: Credible Policy Reform via Signalling," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 99(397), pages 756-72, September.
    11. Julio J. Rotemberg, 1988. "Sovereign Debt Buybacks Can Lower Bargaining Costs," NBER Working Papers 2767, National Bureau of Economic Research, Inc.
    12. Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198290858, October.
    13. Paul R. Masson & Allan Drazen, 1994. "Credibility of Policies Versus Credibility of Policymakers," IMF Working Papers 94/49, International Monetary Fund.
    14. Froot, Kenneth A, 1989. "Buybacks, Exit Bonds, and the Optimality of Debt and Liquidity Relief," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 49-70, February.
    15. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers, Princeton, Department of Economics - Econometric Research Program 338, Princeton, Department of Economics - Econometric Research Program.
    16. Acharya, Sankarshan & Diwan, Ishac, 1993. "Debt Buybacks Signal Sovereign Countries' Creditworthiness: Theory and Tests," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 795-817, November.
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