OECD Working Papers on Sovereign Borrowing and Public Debt Management

ISSN :
2226-4132 (en ligne)
DOI :
10.1787/22264132
Cacher / Voir l'abstract
OECD Working Papers on Sovereign Borrowing and Public Debt Management provide authoritative information on technical and policy issues in the area of public debt management (PDM) and government securities markets. Studies track closely structural issues, trends and challenges in government debt policies and markets. Topics include pressing government debt policy issues such as the measurement of sovereign risk; how to contain the cost of government borrowing operations; the use of electronic systems; sovereign asset and liability management (SALM); liquidity of markets in government debt; advances in risk management; the role of derivatives in PDM; linkages between PDM and monetary policy and the role of debt managers in pricing and managing contingent liabilities.

These studies are prepared for dissemination among sovereign debt managers, financial policy makers, regulators, financial market participants, rating agencies, and academics. By providing information on this highly specialised field of government activity and policy, papers aim to stimulate discussions among a wider audience as well as further analysis.

 

A Critical Analysis of the Technical Assumptions of the Standard Micro Portfolio Approach to Sovereign Debt Management You or your institution have access to this content

Anglais
Cliquez pour accéder: 
    http://oecd.metastore.ingenta.com/content/5k9fdwrf5rvj.pdf
  • PDF
  • http://www.keepeek.com/Digital-Asset-Management/oecd/finance-and-investment/a-critical-analysis-of-the-technical-assumptions-of-the-standard-micro-portfolio-approach-to-sovereign-debt-management_5k9fdwrf5rvj-en
  • LIRE
Auteur(s):
Hans J. Blommestein1, Anja Hubig2
Author Affiliations
  • 1: OCDE, France

  • 2: Humboldt University of Berlin, Allemagne

Date de publication
20 fév 2012
Bibliographic information
N°:
4
Pages
27
DOI
10.1787/5k9fdwrf5rvj-en

Cacher / Voir l'abstract

This paper examines the analytical underpinnings of the standard micro portfolio approach to public debt management (PDM) that aims at minimising longer-term cash-flow based borrowing costs at an acceptable level of risk. The study concludes that two technical key assumptions need to hold for the standard micro portfolio approach to yield optimal (i.e. cost-minimising) results. We argue that these assumptions do not hold in the current borrowing environment characterized by fiscal dominance with complex links between PDM and monetary policy (MP). By using the principles of portfolio theory we demonstrate that in this borrowing environment, cost-risk optimality requires the use of a broader cost concept than employed in the standard micro portfolio approach. This new concept (referred to as effective borrowing costs) incorporates not only the cash flows of the debt portfolio itself, but also those related to primary borrowing requirements. The resulting broader cost measure includes therefore the interactions with the budget. Finally, the paper demonstrates that the standard cost-risk framework of the micro portfolio approach is nested within this new, broader cost concept.
Mots-clés:
fiscal policy, government borrowing, sovereign debt, central banks, monetary policy, public debt management, sovereign risk
Classification JEL:
  • E52: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Monetary Policy
  • E58: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Central Banks and Their Policies
  • E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy
  • H63: Public Economics / National Budget, Deficit, and Debt / Debt; Debt Management; Sovereign Debt