Two puzzling observations have motivated this paper: First, the standard paradigm of optimal fiscal policy, following Lucas & Stokey (1983), assumes counterfactually that public debt is held in state-contingent securities. Is the existing theory as irrelevant as it is silent about fiscal policy...

A windfall of natural resource revenue (or foreign aid) faces government with choices of how to manage public debt, investment, and the distribution of funds for consumption, particularly if the windfall is both anticipated and temporary. We show that the permanent income hypothesis prescription...

This paper develops a model of optimal debt maturity in which the government cannot issue statecontingent debt. As the literature has established, if the government can perfectly commit to fiscal policy, it fully insulates the economy against government spending shocks by purchasing short-term...

New restrictions on short-selling sovereign debt need to be supported by concrete evidence that links systematically unrestricted short-selling activities to fraud, abuse or market manipulation. OECD debt managers noted that there is plenty of empirical evidence on the benefits of short selling,...

A windfall of natural resource revenue (or foreign aid) faces government with choices of how to manage public debt, investment, and the distribution of funds for consumption, particularly if the windfall is both anticipated and temporary. We show that the permanent income hypothesis prescription...

Why do governments issue large amounts of debt? In what sense and for whom is such a policy optimal? We show that twisting the optimal taxation paradigm produces very reasonable predictions for debt and real interest rates. Adding an extra dimension of uncertainty about the political planning...

In this paper we provide a formal test of Barro's tax-smoothing model, using Spanish data covering the period 1850-2022. First, we found that the tax-tilting component has been very important for the Spanish government and is a symptom of the existence of a public deficit bias that has existed...

This paper develops a model of optimal government debt maturity in which the government cannot issue state-contingent bonds and cannot commit to fiscal policy. If the government can perfectly commit, it fully insulates the economy against government spending shocks by purchasing short-term...

Despite the presence of a considerable corpus of literature investigating the impact of aid on nations' development, the efficiency of utilizing this finite pool of development finance remains ambiguous. The main aim of this study is to address the existing research gap by examining the...

Domestic public debt issued by emerging markets has risen significantly relative to international debt in recent years. Some recent empirical evidence also suggests that sovereigns have defaulted differentially on debt held by domestic and external creditors. Standard models of sovereign debt,...