Strategic debt management within the stability and growth pact

Gernot Sieg and Ulrike Stegemann

No 5, Economics Department Working Paper Series from Technische Universität Braunschweig, Economics Department

Abstract: Opportunistic politicians use the composition of public debt as a signal for competence. A competent government will not issue long-term nominal debt, as optimal to balance the budget, but long-term inflation-indexed debt. We consider politicians that pursue the objective of a balanced budget subject to the Stability and Growth Pact and reelection. A government's competence is reflected by its ability to produce a public service at a lower cost (taxes). Competence is private information of politicians.

Keywords: Political Budget Cycle; Debt Management; Inflation-indexed Bonds; Stability and Growth Pact (search for similar items in EconPapers)
JEL-codes: D72 E32 H63 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Strategic Debt Management within the Stability and Growth Pact (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tbswps:5

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