Interactions Between Sovereign Debt Management and Monetary Policy Under Fiscal Dominance and Financial Instability

Hans Blommestein () and Philip Turner

No 3, OECD Working Papers on Sovereign Borrowing and Public Debt Management from OECD Publishing

Abstract: This paper argues that serious fiscal vulnerabilities arising from many years of high government debt will create new and complex interactions between public debt management (PDM) and monetary policy (MP). The paper notes that, although their formal mandates have not changed, recent balance sheet policies of many Central Banks (CBs) have tended to blur the separation of their policies from fiscal policy (FP). The mandates of debt management offices (DMOs) have usually had a microeconomic focus (viz, keeping government debt markets liquid, limiting refunding risks etc). Such mandates have usually eschewed any macroeconomic policy dimension. For these reasons, all clashes in policy mandate between CBs and DMOs have been latent and not overt.

Keywords: central banks and their policies; debt; debt management; monetary policy; policy coordination; policy designs and consistency; policy objectives; sovereign debt (search for similar items in EconPapers)
JEL-codes: E52 E58 E61 H63 (search for similar items in EconPapers)
Date: 2012-02-20
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (44)

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https://doi.org/10.1787/5k9fdwrnd1g3-en (text/html)

Related works:
Chapter: Interactions between sovereign debt management and monetary policy under fiscal dominance and financial instability (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:oec:dafaaf:3-en

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