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The Debt Burden and Debt Maturity

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  • Missale, Alessandro
  • Blanchard, Olivier Jean

Abstract

At low and moderate levels of government debt, there appears to be little relation between the level of debt and its maturity. But at high levels of debt, a strong inverse relation emerges. We start the paper by documenting this inverse relation for those OECD Countries which have reached very high levels of debt. We then provide a theory of the joint movements of debt and maturity which can explain both sets of facts. It is based on the idea that, at high levels of debt, the government may need to decrease the maturity of the debt as debt increases, in order to maintain the credibility of its anti-inflation stance.
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Suggested Citation

  • Missale, Alessandro & Blanchard, Olivier Jean, 1994. "The Debt Burden and Debt Maturity," American Economic Review, American Economic Association, vol. 84(1), pages 309-319, March.
    • Handle: RePEc:aea:aecrev:v:84:y:1994:i:1:p:309-19
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    1. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    2. Alberto Alesina & Alessandro Prati & Guido Tabellini, 1989. "Public Confidence and Debt Management: A Model and A Case Study of Italy," NBER Working Papers 3135, National Bureau of Economic Research, Inc.
    3. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
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    6. Giavazzi, Francesco & Pagano, Marco, 1989. "Confidence Crises and Public Debt Management," CEPR Discussion Papers 318, C.E.P.R. Discussion Papers.
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