Discussion Paper Details

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Title: Financial Policy

Author(s): Dirk Niepelt

Publication Date: February 2018

Keyword(s): debt, Debt Structure and Financial policy

Programme Area(s): International Macroeconomics and Finance and Public Economics

Abstract: This paper reviews theoretical results on financial policy. We use basic accounting identities to illustrate relations between gross assets and liabilities, net debt positions and the appropriation of (primary) budget surplus funds. We then discuss Ramsey policies, answering the question how a committed government may use financial instruments to pursue its objectives. Finally, we discuss additional roles for financial policy that arise as a consequence of political frictions, in particular lack of commitment.

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Bibliographic Reference

Niepelt, D. 2018. 'Financial Policy'. London, Centre for Economic Policy Research.