Public Debt Management: theory and history
As Europe proceeds towards economic and monetary union, fiscal convergence and the prospect of a common money are at the centre of discussion. This volume brings together theoretical, applied and historical research on the management of public debt and its implications for financial stability. Gale fills a gap in the literature using a consistent framework to investigate the welfare economics of public debt, while Calvo and Guidotti analyse the trade-off between indexation and maturity when it comes to minimizing debt service. Confidence crises have become relevant again today in view of the high debt ratios in countries such as Belgium, Italy and Ireland. Alesina, Prati and Tabellini develop a formal model of the propagation of a debt run and use it to interpret Italian debt panics. Giavazzi and Pagano concentrate on how inappropriate debt management can precipitate a run on the currency, while Makinen and Woodward review a broad sweep of historical experience. Three historical studies examine what happens when debts get too large. Eichengreen develops a simple model to examine why capital levies so rarely succeed. De Cecco studies a successful Italian consolidation, while Brown reviews all of US public debt history. Miller, Skidelsky and Weller offer a formal analysis of confidence effects in a modern version of the Mundell-Fleming model. Finally, Aghion and Bolton develop a neat political model of debt, which may become a common tool of analysis.
