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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
Current Issues in Managing Government Debt and Assets
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- Łukasz Rawdanowicz1, Eckhard Wurzel1, Patrice Ollivaud1
- Author Affiliations
- 1: OECD, France
- 21 déc 2011
- Bibliographic information
The management of government debt and assets has important implications for fiscal positions. Debt managers aim to secure non-interrupted funding at lowest medium-term costs subject to risks. Massive crisis-related increases in government debt in most OECD countries and increased risks on the asset side of government balance sheets may imply attaching a larger weight to avoiding risk than prior to the crisis, suggesting to extend debt maturities, possibly above pre-crisis levels. There are a number of trade-offs. Choices on the debt maturity structure interact with unconventional monetary policies. By driving down longer-term yields, the latter increase incentives to extend debt maturities which could counteract the initial monetary policy goal. High debt raises the temptation for eroding it via inflation, but the effectiveness of such policy seems to be limited and might be costly in the long run. Moreover, debt management needs to contribute to ensuring appropriate liquidity and functioning of government bond markets. Building financial assets can be appropriate for some purposes, such as prefunding future temporary spending or transferring wealth to future generations, but the risks are that accumulated funds might be used for current spending or tax reductions. In addition, assets might do little to hedge risks associated with debt servicing costs. Non-financial asset sales can help improve the fiscal situation, but purely revenue-driven privatisations without appropriate regulatory provisions addressing potential market failures should be avoided. Successful balance sheet management requires transparent, accurate and comprehensive measures of not only current but also future assets and liabilities.
- public debt management, monetary policy, public debt, contingent liability, public assets
- Classification JEL:
- E6: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H63: Public Economics / National Budget, Deficit, and Debt / Debt; Debt Management; Sovereign Debt
- H81: Public Economics / Miscellaneous Issues / Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
- H82: Public Economics / Miscellaneous Issues / Governmental Property