A normative argument towards the independence of public debt management
We explore the links between credit expansion, inflation, and inflation expectations, and show that active public debt management can trigger a non-interest rate channel of credit expansion. This creates incentives for the government to use debt management for promoting non-debt management goals, thus, choosing debt maturity structure that differs from its optimal. Through a theoretical monetary policy game, we show that it is welfare improving to delegate public debt management to an independent office separate from the fiscal authority.
TSINTZOS Panagiotis;
EFTHIMIADIS Tilemahos;
PAPADAMOU Stephanos;
SPYROMITROS Eleftherios;
2023-06-30
Rimini Centre for Economic Analysis
JRC120301
1973-3909 (online),
https://openjournals.uwaterloo.ca/index.php/rofea/article/view/4928,
https://publications.jrc.ec.europa.eu/repository/handle/JRC120301,
10.15353/rea.v15i2 (online),
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