Managing the Public Debt in Fiscal Stabilizations: The Evidence
Alessandro Missale, Francesco Giavazzi, Pierpaolo Benigno
NBER Working Paper No. 6311
This paper provides evidence on the behavior of public debt managers during fiscal" stabilizations in OECD countries over the last two decades. We find that debt maturity tends to" lengthen the more credible the program, the lower the long-term interest rate and the higher the" volatility of short-term interest rates. We show that this debt issuing strategy is consistent with" optimal debt management if information between the government and private investors is" asymmetric, as is usually the case at the outset of a stabilization attempt when private investors" may lack full confidence in the announced budget cuts.
Published: Published as "Managing the Public Debt: The Optimal Taxation Approach", JES, Vol. 11, no. 3 (September 1997): 235-265.