| Abstract: | This paper discusses the principles that justify activism ofgovernments in the management of public debt. It starts froma review of the economics literature, which has produced, especiallyin recent years, a number of important propositions on the desirabilityof government interventionism, either for the purpose of filinginformation gaps or to help solve dynamic inconsistency problems.It then considers a number of practical arguments for governmentactivism, stemming from the development of capital markets,and the need to keep up with them. The paper argues that governmentactivism in debt management is much less warranted than thecurrent economic literature or market practices might lead usto believe. The fundamental reason is that governments are nota private actor in the market, and so their optimization problemis radically different from that of other market participants. |
