Public Confidence And Debt Management: A Model And A Case Study Of Italy
High debt countries may face the risk of self-fulfilling debt crises. If the public expects that in the future the government will be unable to roll over the maturing debt, they may refuse to buy debt today and choose to hold foreign assets. This lack of confidence may then be self-fulfilling. This paper argues that under certain conditions, the occurrence of a confidence crisis is more likely if the average maturity of the debt is short. In the contrary, a long and evenly distributed maturity structure may reduce such a risk. We consider the recent Italian experience from this perspective. In particular we ask whether recent developments in the market for government debt showy signs of unstable public confidence, and of a risk premium.
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|Date of creation:||1989|
|Contact details of provider:|| Postal: UNIVERSITY OF CALIFORNIA AT LOS ANGELES, DEPARTMENT OF ECONOMICS, PROGRAM IN APPLIED ECONOMETRICS, LOS ANGELES CALIFORNIA 90024 U.S.A.|
Phone: (310) 825 1011
Fax: (310) 825 9528
Web page: http://www.econ.ucla.edu/
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- Lucas, Robert Jr. & Stokey, Nancy L., 1983.
"Optimal fiscal and monetary policy in an economy without capital,"
Journal of Monetary Economics,
Elsevier, vol. 12(1), pages 55-93.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-419, June.
- Calvo, Guillermo A, 1988. "Servicing the Public Debt: The Role of Expectations," American Economic Review, American Economic Association, vol. 78(4), pages 647-661, September.
- Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March.
- F. Giavazzi & M. Pagano, 1989. "Confidence Crises and Public Debt Management," Working Papers 73, Dipartimento Scienze Economiche, Universita' di Bologna.
- Francesco Giavazzi & Marco Pagano, 1989. "Confidence Crises and Public Debt Management," NBER Working Papers 2926, National Bureau of Economic Research, Inc.
- Giavazzi, Francesco & Pagano, Marco, 1989. "Confidence Crises and Public Debt Management," CEPR Discussion Papers 318, C.E.P.R. Discussion Papers.
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