Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/51311
Authors: 
Sieg, Gernot
Stegemann, Ulrike
Year of Publication: 
2009
Series/Report no.: 
Economics Department Working Paper Series 5
Abstract: 
Opportunistic politicians use the composition of public debt as a signal for competence. A competent government will not issue long-term nominal debt, as optimal to balance the budget, but long-term inflation-indexed debt. We consider politicians that pursue the objective of a balanced budget subject to the Stability and Growth Pact and reelection. A government's competence is reflected by its ability to produce a public service at a lower cost (taxes). Competence is private information of politicians.
Subjects: 
Political Budget Cycle
Debt Management
Inflation-indexed Bonds
Stability and Growth Pact
JEL: 
D72
H63
E32
Document Type: 
Working Paper

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