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Strategic debt management within the stability and growth pact

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  • Sieg, Gernot
  • Stegemann, Ulrike

Abstract

Opportunistic politicians use the composition of public debt as a signal for competence. A competent government will not issue long-term nominal debt, as optimal to balance the budget, but long-term inflation-indexed debt. We consider politicians that pursue the objective of a balanced budget subject to the Stability and Growth Pact and reelection. A government's competence is reflected by its ability to produce a public service at a lower cost (taxes). Competence is private information of politicians.

Suggested Citation

  • Sieg, Gernot & Stegemann, Ulrike, 2009. "Strategic debt management within the stability and growth pact," Economics Department Working Paper Series 5, Technische Universität Braunschweig, Economics Department.
    • Handle: RePEc:zbw:tbswps:5
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    References listed on IDEAS

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    Cited by:

    1. Kratzsch, Uwe & Sieg, Gernot, 2009. "When to regulate airports: A simple rule," Economics Department Working Paper Series 6, Technische Universität Braunschweig, Economics Department.
    2. Robert Joliet & Rabia Nessah, 2016. "Euro White and Euro Yolk: Sovereign Debt Structure Stability in the Eurozone," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 18(03), pages 1-15, September.

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    More about this item

    Keywords

    Political Budget Cycle; Debt Management; Inflation-indexed Bonds; Stability and Growth Pact;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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