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A Framework for Debt-Maturity Management

2019 Bonds
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Release : 2019
Genre : Bonds
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Book Synopsis A Framework for Debt-Maturity Management by : Saki Bigio

Download or read book A Framework for Debt-Maturity Management written by Saki Bigio. This book was released on 2019. Available in PDF, EPUB and Kindle. Book excerpt: We characterize the optimal debt-maturity management problem of a government in a small open economy. The government issues a continuum of finite-maturity bonds in the presence of liquidity frictions. We find that the solution can be decentralized: the optimal issuance of a bond of a given maturity is proportional to the difference between its market price and its domestic valuation, the latter defined as the price computed using the government’s discount factor. We show how the steady-state debt distribution decreases with maturity. These results hold when extending the model to incorporate aggregate risk or strategic default.

Linking Policy to Outcomes

2019
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Release : 2019
Genre :
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Book Synopsis Linking Policy to Outcomes by : Mattia Landoni

Download or read book Linking Policy to Outcomes written by Mattia Landoni. This book was released on 2019. Available in PDF, EPUB and Kindle. Book excerpt: We characterize the long-run stable maturity distribution induced by a fixed issuance policy, defined as the maturity mix of new issues, thereby providing a method to link issuance policies with their long-run consequences. We derive closed-form expressions for a new class of forward-looking stable metrics, including per-period refinancing need, debt service cost, and average maturity -- an indicator of the supply of long-term bonds. We use these metrics to provide a normative analysis of the classical debt-management tradeoff between refinancing risk and debt service cost. Our results indicate that the US Treasury could move closer to the “efficient frontier” by tilting its issuance towards notes.

Debt-Maturity Management with Liquidity Costs

2019
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Release : 2019
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Book Synopsis Debt-Maturity Management with Liquidity Costs by : Saki Bigio

Download or read book Debt-Maturity Management with Liquidity Costs written by Saki Bigio. This book was released on 2019. Available in PDF, EPUB and Kindle. Book excerpt: We characterize the optimal debt-maturity management problem in the presence of liquidity costs. A government issues an arbitrary number of finite-maturity bonds and faces income and interest-rate risk, which can tempt it to default. Optimal issuances are spread out across maturities and are given by the ratio of a value gap over a liquidity coefficient that measures the price impact. The value gap is the proportional difference between the bond prices obtained by discounting with the international interest rates and with the domestic discount factor. This characterization allows us to quantify the contribution of different economic forces--impatience, yield-curve riding, expenditure smoothing, self-insurance, credit risk, and default incentives--in shaping the optimal debt maturity distribution. In an application, we estimate the liquidity coefficients using Spanish debt auction data and exploit the framework to evaluate Spanish debt management practices.

Guidelines for Public Debt Management -- Amended

2003-09-12 Business & Economics
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Release : 2003-09-12
Genre : Business & Economics
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Book Rating : 92X/5 ( reviews)

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Book Synopsis Guidelines for Public Debt Management -- Amended by : International Monetary Fund

Download or read book Guidelines for Public Debt Management -- Amended written by International Monetary Fund. This book was released on 2003-09-12. Available in PDF, EPUB and Kindle. Book excerpt: NULL

Public Debt Management

1990-11-30 Political Science
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Release : 1990-11-30
Genre : Political Science
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Book Rating : 860/5 ( reviews)

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Book Synopsis Public Debt Management by : Rudiger Dornbusch

Download or read book Public Debt Management written by Rudiger Dornbusch. This book was released on 1990-11-30. Available in PDF, EPUB and Kindle. Book excerpt: As Europe proceeds towards economic and monetary union, fiscal convergence and the prospect of a common money are at the centre of discussion. This volume from the Centre for Economic Policy Research brings together theoretical, applied and historical research on the management of public debt and its implications for financial stability. Gale fills a gap in the literature, using a consistent framework to investigate the welfare economics of public debt, while Calvo and Guidotti analyse the trade-off between indexation and maturity when it comes to minimizing debt service. Confidence crises have become relevant again in view of the high debt ratios in countries such as Belgium, Italy and Ireland. Alesina, Prati and Tabellini develop a formal model of the propagation of a debt run and use it to interpret Italian debt panics. Giavazzi and Pagano concentrate on how inappropriate debt management can precipitate a run on the currency while Makinen and Woodward review a broad sweep of historical experience.

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