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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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    1. Julio J. Rotemberg, 1988. "Sovereign Debt Buybacks Can Lower Bargaining Costs," NBER Working Papers 2767, National Bureau of Economic Research, Inc.
    2. Cohen, D. & Verdier, T., 1991. "Secret "Buybacks" of LDC Debt," DELTA Working Papers 91-18, DELTA (Ecole normale supérieure).
    3. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482 Elsevier.
    4. Allan Drazen & Paul R. Masson, 1993. "Credibility of Policies versus Credibility of Policymakers," NBER Working Papers 4448, National Bureau of Economic Research, Inc.
    5. 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, vol. 34(4), pages 795-817, November.
    6. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
    7. 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, vol. 30(1), pages 49-70, February.
    8. Jeremy Bulow & Kenneth Rogoff, 1989. "Sovereign Debt Repurchases: No Cure for Overhang," NBER Working Papers 2850, National Bureau of Economic Research, Inc.
    9. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
    10. Rodrik, Dani, 1989. "Promises, Promises: Credible Policy Reform via Signalling," Economic Journal, Royal Economic Society, vol. 99(397), pages 756-72, September.
    11. Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, number 9780198290858.
    12. 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.
    13. Dornbusch, Rudiger, 1991. "Credibility and Stabilization," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 837-50, August.
    14. Marchesi, Silvia & Thomas, Jonathan P, 1999. "IMF Conditionality as a Screening Device," Economic Journal, Royal Economic Society, vol. 109(454), pages C111-25, March.
    15. Drudi, F. & Prati, A., 1998. "Signaling Fiscal Regime Sustainability," Papers 335, Banca Italia - Servizio di Studi.
    16. Paul R. Krugman, 1989. "Market-Based Debt-Reduction Schemes," NBER Working Papers 2587, National Bureau of Economic Research, Inc.
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