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Abstract: "Greece and Italy initiated efforts to improve public debt management and develop their domestic debt markets respectively in the late 1970s and mid-1980s. At that time, both countries suffered from large and rapidly growing public debt, excessive reliance on short-term bills held by commercial banks, a strong preference of households to save in bank deposits, and a weak presence of institutional investors (pension funds, insurance companies, and mutual funds). Continuing large fiscal deficits, high levels of interest rates and inflation, and serious policy credibility problems impeded the use of long-term instruments. Campanaro and Vittas provide a detailed analysis of the characteristics of the instruments that were used in these two countries, their pace of issuance, and their impact on the composition of public debt. The authors note that the main Greco-Roman lesson for developing and transition countries concerns the transition from an excessive reliance on short-term Treasury bills, held by captive banks, to a liquid market with long-term instruments held, and actively traded, by long-term institutional investors. The transition required moving gradually to medium-term instruments, experimenting with innovation, and targeting households and foreign investors, while taking steps to establish policy credibility by lowering fiscal deficits and inflation. When reliance on captive sources of finance was substantially reduced and policy credibility was established, both countries focused on developing active money markets and liquid secondary markets with benchmark issues of fixed-rate long-term securities. They ultimately succeeded in developing active professional markets, using modern practices, targeting well-established European institutional investors, and integrating into the highly sophisticated euro markets. However, integration into the euro markets was the culmination of a prolonged effort of modernization and adaptation and was greatly facilitated by their strong political commitment to achieve economic convergence and join the euro zone. This paper a product of the Financial Sector Operations and Policy Department is part of a larger effort in the department to study public debt management and debt market development"--World Bank web site.
Greece and Italy initiated efforts to improve public debt management and develop their domestic debt markets respectively in the late 1970s and mid-1980s. At that time, both countries suffered from large and rapidly growing public debt, excessive reliance on short-term bills held by commercial banks, a strong preference of households to save in bank deposits, and a weak presence of institutional investors (pension funds, insurance companies, and mutual funds). Continuing large fiscal deficits, high levels of interest rates and inflation, and serious policy credibility problems impeded the use of long-term instruments.Campanaro and Vittas provide a detailed analysis of the characteristics of the instruments that were used in these two countries, their pace of issuance, and their impact on the composition of public debt. The authors note that the main Greco-Roman lesson for developing and transition countries concerns the transition from an excessive reliance on short-term Treasury bills, held by captive banks, to a liquid market with long-term instruments held, and actively traded, by long-term institutional investors. The transition required moving gradually to medium-term instruments, experimenting with innovation, and targeting households and foreign investors, while taking steps to establish policy credibility by lowering fiscal deficits and inflation.When reliance on captive sources of finance was substantially reduced and policy credibility was established, both countries focused on developing active money markets and liquid secondary markets with benchmark issues of fixed-rate long-term securities. They ultimately succeeded in developing active professional markets, using modern practices, targeting well-established European institutional investors, and integrating into the highly sophisticated euro markets. However, integration into the euro markets was the culmination of a prolonged effort of modernization and adaptation and was greatly facilitated by their strong political commitment to achieve economic convergence and join the euro zone.This paper - a product of the Financial Sector Operations and Policy Department - is part of a larger effort in the department to study public debt management and debt market development.
Domestic government debt markets play a critical role in managing public debt effectively and reducing the vulnerability of developing countries to financial crises. Many aspects of debt markets - money, primary, and secondary markets; a diversified investor base; and sound securities custody and settlement systems and regulation - interact in complex ways and are affected by previous policies and developments. Developing the Domestic Government Debt Market: From Diagnostics to Reform Implementation draws insights from a joint pilot program set up by the World Bank and International Monetary Fund to design relevant reform and capacity-building programs in twelve countries. The experiences of these geographically and economically diverse countries - Bulgaria, Colombia, Costa Rica, Croatia, Indonesia, Kenya, Lebanon, Nicaragua, Pakistan, Sri Lanka, Tunisia, and Zambia - illustrate the challenges, obstacles, and progress in applying principles of market development. Developing the Domestic Government Debt Market will serve government officials contemplating or in the process of reforming their practices, providers of technical assistance, and practitioners working on building capacity in debt market development. Because effective development of debt markets is one key piece in sound public debt management, readers will also be interested in the companion volume, Managing Public Debt, published by The World Bank in February 2007, based on the same joint pilot program.
We consider public debt from a long-term historical perspective, showing how the purposes for which governments borrow have evolved over time. Periods when debt-to-GDP ratios rose explosively as a result of wars, depressions and financial crises also have a long history. Many of these episodes resulted in debt-management problems resolved through debasements and restructurings. Less widely appreciated are successful debt consolidation episodes, instances in which governments inheriting heavy debts ran primary surpluses for long periods in order to reduce those burdens to sustainable levels. We analyze the economic and political circumstances that made these successful debt consolidation episodes possible.
This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
A dive into the origins, management, and uses and misuses of sovereign debt through the ages. Public debts have exploded to levels unprecedented in modern history as governments responded to the Covid-19 pandemic and ensuing economic crisis. Their dramatic rise has prompted apocalyptic warnings about the dangers of heavy debtsabout the drag they will place on economic growth and the burden they represent for future generations. In Defense of Public Debt offers a sharp rejoinder to this view, marshaling the entire history of state-issued public debt to demonstrate its usefulness. Authors Barry Eichengreen, Asmaa El-Ganainy, Rui Esteves, and Kris James Mitchener argue that the ability of governments to issue debt has played a critical role in addressing emergenciesfrom wars and pandemics to economic and financial crises, as well as in funding essential public goods and services such as transportation, education, and healthcare. In these ways, the capacity to issue debt has been integral to state building and state survival. Transactions in public debt securities have also contributed to the development of private financial markets and, through this channel, to modern economic growth. None of this is to deny that debt problems, debt crises, and debt defaults occur. But these dramatic events, which attract much attention, are not the entire story. In Defense of Public Debt redresses the balance. The authors develop their arguments historically, recounting two millennia of public debt experience. They deploy a comprehensive database to identify the factors behind rising public debts and the circumstances under which high debts are successfully stabilized and brought down. Finally, they bring the story up to date, describing the role of public debt in managing the Covid-19 pandemic and recession, suggesting a way forward once governmentsnow more heavily indebted than beforefinally emerge from the crisis.
This pocket-sized reference on key environmental data for over 200 countries includes key indicators on agriculture, forestry, biodiversity, energy, emission and pollution, and water and sanitation. The volume helps establish a sound base of information to help set priorities and measure progress toward environmental sustainability goals.
"Zervos documents the precise costs of debt and equity issuance, both domestically and internationally, for firms in Brazil, Chile, and Mexico. Costs include investment banking and legal fees, regulatory and exchange listing costs, rating agency fees, and expenditures for marketing and publishing. Her findings suggest that Brazilian firms face similar costs in issuing debt locally or abroad, whereas domestic equity issuance is nearly twice as expensive as debt. While the Chilean domestic corporate debt market is well developed by emerging market standards (size of the market and maturity of issues), Chilean firms can issue debt more cheaply internationally than at home. In addition, while equity financing is cheaper in Chile from a transaction cost perspective, over the past decade most firms have used bonds rather than shares to raise capital. This financing trend is true in all three countries. Finally, Mexican firms can issue debt at the lowest costs of the three, but face the highest equity issuing costs. In addition to documenting these features, the author sheds light on how the investor base in these countries plays a strong role in influencing the ability of firms to access domestic capital markets"--Abstract.
"Estache, Laffont, and Zhang develop a model to analyze the effects of asymmetric information on optimal universal service policy in the public utilities of developing countries. Optimal universal service policy is implemented using two regulatory instruments, pricing and network investment. Under discriminatory pricing, asymmetric information leads to a higher price and smaller network in the rural area than under full information. Under uniform pricing, the price is lower but the network is even smaller. In addition, under both pricing regimes, not only the firm but also taxpayers have incentives to collude with the regulator. This paper, a product of the Office of the Vice President, Infrastructure Network, is part of a larger effort in the network to promote analytical work on emerging policy issues in infrastructure service delivery"-- World Bank web site.