Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- List of conference participants
- 1 Introduction
- 2 The efficient design of public debt
- 3 Indexation and maturity of government bonds: an exploratory model
- Discussion
- 4 Public confidence and debt management: a model and a case study of Italy
- 5 Confidence crises and public debt management
- 6 Funding crises in the aftermath of World War I
- 7 The capital levy in theory and practice
- 8 Episodes in the public debt history of the United States
- 9 The Italian national debt conversion of 1906
- 10 Fear of deficit financing – is it rational?
- 11 Government domestic debt and the risk of default: a political–economic model of the strategic role of debt
- Index
Discussion
Published online by Cambridge University Press: 05 July 2011
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- List of conference participants
- 1 Introduction
- 2 The efficient design of public debt
- 3 Indexation and maturity of government bonds: an exploratory model
- Discussion
- 4 Public confidence and debt management: a model and a case study of Italy
- 5 Confidence crises and public debt management
- 6 Funding crises in the aftermath of World War I
- 7 The capital levy in theory and practice
- 8 Episodes in the public debt history of the United States
- 9 The Italian national debt conversion of 1906
- 10 Fear of deficit financing – is it rational?
- 11 Government domestic debt and the risk of default: a political–economic model of the strategic role of debt
- Index
Summary
This complex and interesting paper explores the relationships among the ability of a government to ‘precommit’ and the optimal degree of debt indexation and maturity structure. The paper is essentially a series of examples using a government budget constraint and a loss function, with no specified model of how the economy works, so it is not clear how general the results are. But the results are intuitively clear. Precommitment and indexation are good, but not perfect, substitutes; indexation seems to me to be a form of precommitment. With precommitment, long debt is optimal, because it allows maximum flexibility in using the inflation tax to smooth the path of the tax burden once uncertainty about shocks is resolved. Without precommitment, the optimal maturity structure becomes shorter, to reduce the temptation on the government to use the inflation tax unexpectedly.
The paper is sufficiently complex that I had to spend quite a bit of time working through the models to see the results. Part of the difficulty comes from the authors' tendency to discuss results before deriving them. But part also is in the complexity of the problems being studied. So before I come to some critical questions at the end of this comment, I will provide a brief reader's guide to the paper, going over the model, the structure of the paper, and the results.
- Type
- Chapter
- Information
- Public Debt ManagementTheory and History, pp. 82 - 93Publisher: Cambridge University PressPrint publication year: 1990
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