Governments as borrowers and regulators

Timm Betz () and Amy Pond ()
Additional contact information
Timm Betz: Washington University in St. Louis
Amy Pond: Washington University in St. Louis

The Review of International Organizations, 2025, vol. 20, issue 1, No 7, 189-218

Abstract: Abstract The ability to borrow is important for government survival. Governments routinely resort to policies that privilege their own debt on financial markets, exploiting their dual role as borrowers and regulators. We label such policies as borrowing privileges. These borrowing privileges nudge investors to hold the government’s own debt. They share similarities with prudential regulation, but skew the market in favor of the government’s debt; and they share similarities with financial repression, but are less severe and thus consistent with the growth of financial markets. Introducing the first systematic dataset documenting the use of such policies across countries and over time, we demonstrate that governments implement borrowing privileges when their interactions with the global economy heighten fiscal needs: when borrowing costs indicate tightened access to credit, when trade liberalization undercuts revenue, and where fixed exchange rates increase the value of fiscal space. Despite the mobility of financial assets and constraints from global markets, governments retain latitude in regulating domestic markets to their own fiscal benefit.

Keywords: Sovereign debt; Government bonds; Financial regulation; Banking; Capital mobility; Fiscal policy; Tariff revenue; Exchange rates; Reserve requirements (search for similar items in EconPapers)
JEL-codes: F13 F34 F38 F65 F68 G23 G28 H21 H63 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11558-023-09516-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:revint:v:20:y:2025:i:1:d:10.1007_s11558-023-09516-1

Ordering information: This journal article can be ordered from
http://www.springer. ... iology/journal/11558

DOI: 10.1007/s11558-023-09516-1

Access Statistics for this article

The Review of International Organizations is currently edited by A. Dreher

More articles in The Review of International Organizations from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().