Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9732011 | Review of Economic Dynamics | 2005 | 23 Pages |
Abstract
This paper studies the optimal management of the maturity of government debt in an economy without commitment. We consider a reputation where any deviation triggers reversion to the worst sustainable equilibrium. We obtain two results. First, contrary to earlier literature, we show that a very rich debt structure is not a necessary condition to solve the time-inconsistency problem. Second, we learn how to allocate the outstanding debt into short and long-term bonds to enhance the credibility of the government policy.
Related Topics
Social Sciences and Humanities
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Authors
Begoña DomÃnguez,