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Public-Debt Financing in the case of External Debt

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  • Gianluca Cafiso

Abstract

The objective of this paper is to assess whether non-residents’ holdings of a country’s debt make a difference for debt stabilization, where non-residents’ holdings are considered external debt according to a Balance of Payments perspective. The analysis is empirical and considers the case of Italy, one of the world’s largest debt issuer. We detect two possible channels through which external debt might alter the conditions for debt stabilization. Among these, we focus on the Interest Rate Determination in the primary market of Government Bonds. Our results point out the irrelevance of the investors base for debt stabilization.

Suggested Citation

  • Gianluca Cafiso, 2013. "Public-Debt Financing in the case of External Debt," Working Papers 2013-37, CEPII research center.
    • Handle: RePEc:cii:cepidt:2013-37
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    References listed on IDEAS

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    More about this item

    Keywords

    External Debt; Auction Redemption Yield; Debt Stabilization; Vector Auto Regression; Regime Switch;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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