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Strategic debt management within the stability and growth pact

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  • Sieg, Gernot
  • Stegemann, Ulrike

Abstract

Opportunistic politicians use the composition of public debt as a signal for competence. A competent government will not issue long-term nominal debt, as optimal to balance the budget, but long-term inflation-indexed debt. We consider politicians that pursue the objective of a balanced budget subject to the Stability and Growth Pact and reelection. A government's competence is reflected by its ability to produce a public service at a lower cost (taxes). Competence is private information of politicians. --

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Bibliographic Info

Paper provided by Technische Universität Braunschweig, Economics Department in its series Economics Department Working Paper Series with number 5.

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Date of creation: 2009
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Handle: RePEc:zbw:tbswps:5

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Related research

Keywords: Political Budget Cycle; Debt Management; Inflation-indexed Bonds; Stability and Growth Pact;

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  1. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc.
  2. Jerry Tempelman, 2007. "A commentary on “Does the Fed contribute to a political business cycle?”," Public Choice, Springer, vol. 132(3), pages 433-436, September.
  3. Kevin Grier, 2008. "US presidential elections and real GDP growth, 1961–2004," Public Choice, Springer, vol. 135(3), pages 337-352, June.
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  7. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," Economics Working Papers 0047, Institute for Advanced Study, School of Social Science.
  8. Berger, Helge & Woitek, Ulrich, 1997. " Searching for Political Business Cycles in Germany," Public Choice, Springer, vol. 91(2), pages 179-97, April.
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  10. Leertouwer, Erik & Maier, Philipp, 1999. "Who creates poltical business cycles? : (should central banks be blamed?)," Research Report 99E56, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  11. Beetsma, Roel M.W.J. & Debrun, Xavier, 2007. "The new stability and growth pact: A first assessment," European Economic Review, Elsevier, vol. 51(2), pages 453-477, February.
  12. Adi Brender & Allan Drazen, 2004. "Political Budget Cycles in New versus Established Democracies," NBER Working Papers 10539, National Bureau of Economic Research, Inc.
  13. Sieg, Gernot, 1997. "A model of partisan central banks and opportunistic political business cycles," European Journal of Political Economy, Elsevier, vol. 13(3), pages 503-516, September.
  14. J. Ferris, 2008. "Electoral politics and monetary policy: does the Bank of Canada contribute to a political business cycle?," Public Choice, Springer, vol. 135(3), pages 449-468, June.
  15. Alessandro Missale, . "Optimal Debt Management with a Stability and Growth Pact," Working Papers 166, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  16. Wallace, Myles S. & Warner, John T., 1984. "Fed policy and presidential elections," Journal of Macroeconomics, Elsevier, vol. 6(1), pages 79-88.
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