Strategic debt management within the stability and growth pact
AbstractOpportunistic 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 InfoPaper provided by Technische Universität Braunschweig, Economics Department in its series Economics Department Working Paper Series with number 5.
Date of creation: 2009
Date of revision:
Political Budget Cycle; Debt Management; Inflation-indexed Bonds; Stability and Growth Pact;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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