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The Debt Burden and Debt Maturity

  • Alessandro Missale
  • Olivier Jean Blanchard

At low and moderate levels of government debt, there appears to be little relation between the level of debt and its maturity. But at high levels of debt, a strong inverse relation emerges. We start the paper by documenting this inverse relation for those OECD Countries which have reached very high levels of debt. We then provide a theory of the joint movements of debt and maturity which can explain both sets of facts. It is based on the idea that, at high levels of debt, the government may need to decrease the maturity of the debt as debt increases, in order to maintain the credibility of its anti-inflation stance.

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File URL: http://www.nber.org/papers/w3944.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3944.

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Date of creation: Dec 1991
Date of revision:
Publication status: published as American Economic Review, 84-1, March 1994, pp. 309-319.
Handle: RePEc:nbr:nberwo:3944
Note: EFG
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Web page: http://www.nber.org
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  1. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
  2. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  3. Francesco Giavazzi & Marco Pagano, 1989. "Confidence Crises and Public Debt Management," Working Papers 73, Dipartimento Scienze Economiche, Universita' di Bologna.
  4. Bohn, Henning, 1988. "Why do we have nominal government debt?," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 127-140, January.
  5. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  6. Alesina, A. & Prati, A. & Tabellini, G., 1989. "Public Confidence And Debt Management: A Model And A Case Study Of Italy," Papers 5, California Los Angeles - Applied Econometrics.
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