IV. Discussion of the Guidelines .............................................................................................10 1. Debt Management Objectives and Coordination...................................................10 2. Transparency and Accountability ..........................................................................14 3. Institutional Framework.................................

We analyze effects of public debt in a basic endogenous growth model with productive public spending. We demonstrate that a discretionary policy violates the inter-temporal government budget constraint along a balanced growth path. A balanced government budget gives a unique saddle point stable growth path. With a rule based policy, two saddle point stable balanced growth paths can occur, depen...

The negative effects of a high level of government debt are now generally acknowledged. The extensive borrowing of past years has enlarged the share of interest payments in government spending, thus restricting the scope for future fiscal policy action. There is very little prospect of being able to initiate economic recovery by way of expansive fiscal policy. High deficits and rising debt rati...

This paper studies optimal sovereign debt policy of the government with limited commitment and compare the optimal policies in economies with and without government’s private capital control. The comparison of optimal sovereign debt policies can rationalize why more financially open market economies show more severe allocation puzzle — more negative relationship between growth and public capita...

China’s local government debt (LGD) has recently become the focus of economic policy debates. However, information about LGD and its impact on economic growth in the Chinese economy is scarce. This paper attempts to present an empirical investigation of the impact of China’s LGD on economic growth. It is probably the first of its kind to focus on China and thus contributes to the general litera...

In this paper, we investigate the trade-off between the needs for budget consolidation and the desirability of expansionary fiscal policies as a means of demand management by simulating alternative scenarios with a macroeconometric model of the Slovenian economy. The simulations show that for the Slovenian economy an expansionary fiscal policy is neither feasible nor desirable: it leads to unsu...

Fiscal considerations and commitment drive the choice of monetary policy regime, especially for developing countries. I survey the fiscal foundations of price determination, and study the maximize-inflation-tax, interest rate rule, peg and currency board, and dollarization regime. Since nominal debt acts like equity for the government, the dollarization question is like the question whether a f...

The sovereign debt crisis challenged investors in European government bonds to deal with volatile interest rate spreads. For managing sovereign risk, “Eurex” introduced futures contracts on Italian government bonds reflecting risks of lower rated countries. We analyze hedging strategies for bond portfolios with futures on German and Italian government bonds before and during the sovereign debt ...