Marketing of public debt : the fixed-price technique
We develop a simple model in which government bonds are marketed at a present yield, rather than at a competitive one, and we study the consequences of this debt management choice on market equilibrium and the dynamics of debt accumulation. We show how equilibrium sequences with demand rationing are associated with interest costs that are higher than under competition and that supply rations are unsustainable. In the long run, if the debt manager follows an optimal policy in terms of service costs minimization and consistently responds to the signals represented by the rations, the economy converges to the competitive stationary state with no debt.
Volume (Year): 6 (1993)
Issue (Month): 2 (Autumn)
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