A Short Note on Optimal Debt Management under Asymmetric Information

Elisa Faraglia, Albert Marcet, Rigas Oikonomou and Andrew Scott

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We show that under asymetric information, if the government holds advanced information relative to the investors.some debt management policies may lead to bond market instability. The In particular, we show that the repurchase/reissuance strategy assumd in most of the current debt management literature would cause such a crisis and it would be therefore highly suboptimal.of a bond below its maturity this does compromise the ability of long bonds to provide fiscal insurance.

Date: 2019-02-11
New Economics Papers: this item is included in nep-ias
Note: ef307
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