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Public Debt Managers Behaviour: Interactions with Macro Policies

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  • Lex Hoogduin
  • Bahar Öztürk
  • Peter Wierts

Abstract

We investigate the evolution of public debt management, the policy behaviour of debt managers, and the impact of debt management on financial stability and monetary policy.The focus is on the euro area. Empirical estimations of a debt management reaction function indicate that the share of short term debt ( i ) responds to the yield curve or the level of interest rates, in line with the objective of cost minimisation; and ( ii ) has been increasing especially since the onset of the economic crisis. The increase in short term debt brings about higher refinancing risks and strengthens the interaction of public debt management with financial stability and monetary policy. The sharp increase in cross border ownership of public debt since the adoption of the euro further amplifies potential spill-over effects. Policy recommendations focus on the need for transparency on the use of derivatives and prudent debt management that reflects broader macroeconomic considerations.

Suggested Citation

  • Lex Hoogduin & Bahar Öztürk & Peter Wierts, 2010. "Public Debt Managers Behaviour: Interactions with Macro Policies," DNB Working Papers 273, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:273
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    References listed on IDEAS

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    1. Iman van Lelyveld & Franka Liedorp, 2004. "Interbank Contagion in the Dutch Banking Sector," DNB Working Papers 005, Netherlands Central Bank, Research Department.
    2. Iman van Lelyveld & Franka Liedorp, 2004. "Interbank Contagion in the Dutch Banking Sector," DNB Working Papers 005, Netherlands Central Bank, Research Department.
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    Cited by:

    1. Andrew Filardo & Madhusudan Mohanty & Ramon Moreno, 2012. "Central bank and government debt management: issues for monetary policy," BIS Papers chapters,in: Bank for International Settlements (ed.), Fiscal policy, public debt and monetary policy in emerging market economies, volume 67, pages 51-71 Bank for International Settlements.
    2. Philip Turner, 2011. "Fiscal Dominance and the Long-Term Interest Rate," FMG Special Papers sp199, Financial Markets Group.
    3. Hans J. Blommestein & Philip Turner, 2012. "Interactions Between Sovereign Debt Management and Monetary Policy Under Fiscal Dominance and Financial Instability," OECD Working Papers on Sovereign Borrowing and Public Debt Management 3, OECD Publishing.
    4. Hans J Blommestein & Philip Turner, 2012. "Interactions between sovereign debt management and monetary policy under fiscal dominance and financial instability," BIS Papers chapters,in: Bank for International Settlements (ed.), Threat of fiscal dominance?, volume 65, pages 213-237 Bank for International Settlements.
    5. Hans J Blommestein & Anja Hubig, 2012. "Is the standard micro portfolio approach to sovereign debt management still appropriate?," BIS Papers chapters,in: Bank for International Settlements (ed.), Threat of fiscal dominance?, volume 65, pages 141-155 Bank for International Settlements.
    6. Jagjit S Chadha & Philip Turner & Fabrizio Zampolli, 2013. "The interest rate effects of government debt maturity," BIS Working Papers 415, Bank for International Settlements.
    7. Bank for International Settlements, 2011. "Interactions of sovereign debt management with monetary conditions and financial stability," CGFS Papers, Bank for International Settlements, number 42.
    8. R Gandhi, 2012. "Sovereign debt management in India: interaction with monetary policy," BIS Papers chapters,in: Bank for International Settlements (ed.), Fiscal policy, public debt and monetary policy in emerging market economies, volume 67, pages 193-198 Bank for International Settlements.
    9. Johannes Holler, 2013. "Funding Strategies of Sovereign Debt Management: A Risk Focus," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 51-74.
    10. Javier J. Pérez & Rocío Prieto, 2014. "The structure of sub-natural public debt: Liquidity vs credit risk," Working Papers 1403, Banco de España;Working Papers Homepage.
    11. António Afonso, & Manish K. Singh, 2016. "Is the supply of long-term debt independent of the term premia? Evidence from Portugal," Working Papers Department of Economics 2016/11, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.

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