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Where states and markets meet: the financialisation of sovereign debt management

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  • Florian Fastenrath
  • Michael Schwan
  • Christine Trampusch

Abstract

Financial markets play an indispensable role in the management of sovereign debt, that is, the mechanics of how and from whom governments borrow. This paper suggests a novel, two-dimensional concept to measure the financialisation of sovereign debt management (SDM): (1) the reliance on financial markets as a governance mechanism and (2) the adoption of a sense-making framework grounded in financial economics. We split this concept into nine indicators and apply it to data from 23 OECD countries between 1980 and 2010. Our analysis illustrates the predominant commonalities across countries, but at the same time, country-specific differences. We interpret them as two sides of the same coin in the light of an overarching trend of increasing alignment to financial markets. This article is not only one of the first cross-national as well as longitudinal studies of the dynamics in SDM; it also reveals that the relationship between finance and governments in the SDM is by no means one-sided.

Suggested Citation

  • Florian Fastenrath & Michael Schwan & Christine Trampusch, 2017. "Where states and markets meet: the financialisation of sovereign debt management," New Political Economy, Taylor & Francis Journals, vol. 22(3), pages 273-293, May.
    • Handle: RePEc:taf:cnpexx:v:22:y:2017:i:3:p:273-293
    DOI: 10.1080/13563467.2017.1232708
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    References listed on IDEAS

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    1. Carmen M. Reinhart & M. Belen Sbrancia1, 2015. "The liquidation of government debt," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 30(82), pages 291-333.
    2. Christian Marazzi, 2011. "The Violence of Financial Capitalism," MIT Press Books, The MIT Press, edition 2, volume 1, number 1584351020, April.
    3. Oecd, 2005. "Overview of Advances in Risk Management of Government Debt," Financial Market Trends, OECD Publishing, vol. 2005(1), pages 117-134.
    4. Abdul Khan & Stephen Mayes, 2009. "Transition to Accrual Accounting," IMF Technical Notes and Manuals 09/02, International Monetary Fund.
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    1. Giannini, Bianca & Oldani, Chiara, 2022. "Asymmetries in the sustainability of public debt in the EU: The use of swaps," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    2. Christensen, Mark & Newberry, Susan & Potter, Bradley N., 2019. "Enabling global accounting change: Epistemic communities and the creation of a ‘more business-like’ public sector," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 58(C), pages 53-76.
    3. Giselle Datz, 2021. "Ties that bind and blur: financialization and the evolution of sovereign debt as private contract," Review of Evolutionary Political Economy, Springer, vol. 2(3), pages 571-587, December.
    4. Lena Rethel, 2018. "Capital market development in Southeast Asia: From speculative crisis to spectacles of financialization," Economic Anthropology, Wiley Blackwell, vol. 5(2), pages 185-197, June.
    5. Armin Mertens & Christine Trampusch & Florian Fastenrath & Rebecca Wangemann, 2021. "The political economy of local government financialization and the role of policy diffusion," Regulation & Governance, John Wiley & Sons, vol. 15(2), pages 370-387, April.
    6. Bianca Giannini & Chiara Oldani, 2020. "Governance fiscale e sostenibilitˆ del debito pubblico (The sustainability of public debt in the European Union)," Moneta e Credito, Economia civile, vol. 73(292), pages 385-395.
    7. Cooiman, Franziska, 2021. "Veni vidi VC – the backend of the digital economy and its political making," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Latest Ar, pages 1-1.
    8. Preunkert, Jenny, 2020. "Primary dealer systems in the European Union," MaxPo Discussion Paper Series 20/1, Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo).
    9. Christine Trampusch & Florian Fastenrath, 2021. "States' interests as limits to the power of finance: Regulatory reforms in early local government financialization in the US and UK," Regulation & Governance, John Wiley & Sons, vol. 15(2), pages 245-261, April.
    10. Ben Fine, 2022. "Commentary on Financialisation Theme Issue Papers ," Environment and Planning A, , vol. 54(1), pages 199-203, February.
    11. Hulya Dagdeviren & Ewa Karwowski, 2022. "Impasse or mutation? Austerity and (de)financialisation of local governments in Britain [Regul(ariz)ation of fringe credit: Payday lending and the borders of global financial practice]," Journal of Economic Geography, Oxford University Press, vol. 22(3), pages 685-707.
    12. Wolswijk, Guido, 2020. "Drivers of European public debt management," Working Paper Series 2437, European Central Bank.
    13. Yi Feng & Fulong Wu & Fangzhu Zhang, 2024. "Building state centrality through state selective financialization: Reconfiguring the land reserve system in China," Environment and Planning A, , vol. 56(3), pages 766-783, May.
    14. Fastenrath, Florian & Orban, Agnes & Trampusch, Christine, 2017. "From economic gains to social losses: How stories shape expectations in the case of German municipal finance," MPIfG Discussion Paper 17/20, Max Planck Institute for the Study of Societies.
    15. Silano, Filippo, 2022. "The effectiveness of revolving door laws: Evidence from government debt management," ILE Working Paper Series 63, University of Hamburg, Institute of Law and Economics.

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