Reputation in a Model with a Limited Debt Structure

Begoña Domínguez

Review of Economic Dynamics, 2005, vol. 8, issue 3, 600-622

Abstract: This paper studies the optimal management of the maturity of government debt in an economy without commitment. We consider a reputation where any deviation triggers reversion to the worst sustainable equilibrium. We obtain two results. First, contrary to earlier literature, we show that a very rich debt structure is not a necessary condition to solve the time-inconsistency problem. Second, we learn how to allocate the outstanding debt into short and long-term bonds to enhance the credibility of the government policy. (Copyright: Elsevier)

Keywords: Debt Management; Optimal Taxation; Time-Consistency (search for similar items in EconPapers)
JEL-codes: E61 E62 H21 H63 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (3)

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DOI: 10.1016/j.red.2005.01.007

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