Zugl.: Potsdam, Universiẗat, Diss., 2008. / Literaturverz.

Techn. Hochsch., Diss., 1993 u.d.T.: Pampel, Ralf: Einsatzmöglichkeiten von Finanzinnovationen im staatlichen Debt Management--Darmstadt.

Master-Arbeit Univ. St. Gallen, 2006.

Zugl.: Berlin, Freie Univ., Diss., 2006

There is a growing and legitimate concern about sovereign debt increasing to unsustainable levels among the Sub-Saharan African (SSA) countries. Understanding the determinants of external debt to these countries influenced the direction of this study. The existing literature that was examined shed light mostly on the qualitative determinants of sovereign borrowing. In addition to existing empirical literature, there is a complimentary need to examine further the quantitative determinants of external debt. The researcher seeks to establish the extent to which the cost of borrowing (proxied by interest rate) explains the changes in the borrowing behaviour (proxied by external debt) among SSA countries. To achieve this objective, data from 36 SSA countries for the period 2009–2017 was used. The data were collected from International Debt Statistics compiled by the World Bank. External debt has been regressed against interest rate and other predictor variables. Hausman tests, robustness tests and collinearity tests were carried out to ascertain the validity of results. Interest rate is found to have a positive determining impact on external debt for all SSA countries aggregated: SSA countries excluding South Africa (SA); SSA excluding Nigeria; SSA excluding Nigeria and SA; SSA excluding debt-distressed countries, middle income and oilexporting countries. It does not have predictive power over changes in external debt for SSA excluding countries at high risk of distress; countries with low to moderate risk of distress; heavily indebted poor countries (HIPC) initiative post-implementation recipient countries; low income, other resource intensive and non-resource-intensive countries. External debt is also found to respond to changes in: gross national income (GNI); exports-to-imports ratio; primary income on foreign direct investment (FDI); reserves-to-imports ratio; FDI-to-GNI ratio; debt service-to-GNI ratio; interest arrears on long-term debt; short-term-to-total-debt ratio; and reserves-to-debt ratio for different country groupings. Different country groupings are found to have unique combinations of external debt determinants.

This thesis investigates different issues related to the issuance of debt by sovereign bodies such as governments, under uncertainty about the future interest rates. Several dynamic models of interest rates are presented, along with extensive numerical experiments for calibration of models and comparison of performance on real financial market data. The main contribution of the thesis is the construction and demonstration of a stochastic optimisation model for debt issuance under interest rate uncertainty. When the uncertainty is modelled using a model from a certain class of single factor interest rate models, one can construct a scenario tree such that the number of scenarios grows linearly with time steps. An optimization model is constructed using such a one factor scenario tree. For a real government debt issuance remit, a multi-stage stochastic optimization is performed to choose the type and the amount of debt to be issued and the results are compared with the real issuance. The currently used simulation models by the government, which are in public domain, are also reviewed. Apparently, using an optimization model, such as the one proposed in this work, can lead to substantial savings in the servicing costs of the issued debt

The aim of this thesis is to point out recent development in the field of debt creation, its concordance with academic practice and to outline feasible utilization of financial modeling in the area of government deficits. The effort is to put institutional operation of debt management into context of recent history of financial markets and to verify its success. The process of debt portfolio management with use of advanced financial tools is shown on the sample of Czech debt manager. From the observation of the overall environment we can state the effort to develop efficient domestic debt market and the conception of long-term strategies based on risk management principles and to draw a set of specific recommendations applicable both to local and general conditions.

This thesis consists of three self-contained papers covering different aspects of public debt management. From a methodological point of view they all have in common that results and models from the theory of finance are used to analyze the effects of public debt management. The first paper, Neutrality of Public Debt Management, studies the case when public debt management does not matter, i.e. when it is neutral. Although strong assumptions are needed to ensure neutrality of public debt management it is nevertheless of interest to study it, since an analysis illuminates the mechanisms through which public debt management affects the economy. The paper starts with a discussion of the assumptions that are needed to ensure neutrality in the models used in the literature. The remainder of the paper tries to relax some of these assumptions. The model employed is an intertemporal general equilibrium model. It is shown that if the agents are identical, public debt is neutral provided the agents pierce the veil of government, and all taxes associated with public debt are lump-sum. It is also shown that if the agents are different but have sufficiently similar utility functions that exhibit hyperbolic absolute risk aversion (i.e., the agents have linear risk tolerance), public debt management is neutral in aggregates, provided the agents pierce the veil of government and all taxes associated with the debt service are lump-sum. This means that public debt management neither affects prices nor aggregate consumption; it might, however affect the individual agent’s consumption-savings decision. Since the class of utility functions that exhibit hyperbolic absolute risk aversion is widely used in economic analysis, this result has several theoretical and empirical implications. The result also has implications for the choice of model in the third paper of the thesis. The second paper, Objectives of Public Debt Management, discusses the objectives of public debt management in an atemporal mean-variance framework. The model employed in this paper differs in one important aspect from the ones previously used in the literature; it takes the firms’ investment decisions into account and hence endogenizes the supply of assets to some extent. It is shown that if the firms’ behavior is introduced, objectives that in the literature have been assumed to stimulate the economic activity do not necessarily have the desired effect. The paper also discusses different objectives aiming at welfare-improvements and economic stimulation. Since the analysis is performed in a unified framework, it is possible to compare the objectives and to discuss their welfare implications. Of particular interest is the welfare aspects of minimization of the costs of public debt. Finally, the paper also discusses the effectiveness of the objectives and it is shown that with one exception, cost minimization, effectiveness declines when the government-issued debt instruments’ share of the asset market falls. The last paper, Public Debt Management and the Term Structure of Interest Rates, develops and uses a stochastic overlapping generations model to analyze the impact of public debt management on the term structure of interest rate. In most of the literature public debt management is thought of as changes in the maturity structure of the outstanding public debt. A change in the maturity structure implies that public debt management affects, e.g., future tax liabilities and hedging opportunities. To capture these effects it is necessary to use an intertemporal framework. In contrast to most models in the literature on public debt management, the model in this paper is intertemporal and takes the general equilibrium effects of public debt management into account, by integrating the financial and real sectors of the economy. This means that current and future asset prices, as well as investments are affected by public debt management. The analysis suggests that it is not the quantities of the long-term and short-term bonds, per se, that determine the effects on the term structure of interest rates. What determines these effects is how public debt management affects the hedging opportunities through changes in asset supply, taxes and prices. / Diss. Stockholm : Handelshögskolan

Public debt managers have a certain range of borrowing instruments varying in their interest rate type, currency, maturity etc. at their disposal and have to find an appropriate combination of those while raising debt on behalf of the government. In selecting the combination of instruments to be issued, i.e. the borrowing strategy to be pursued for a certain period of time, debt managers need to consider several objectives that are conflicting by their nature, and the uncertainty associated with the outcomes of the decisions made. The objective of this thesis is to propose an approach to support the decision making process regarding sovereign debt issuance. We incorporate Multi-Criteria Decision Making (MCDM) tools using a multi-period stochastic programming model that takes into account sequential decisions concerned with debt issuance policies. The model is then applied for public debt management in Turkey.

Management of public debt is crucial for every country. Public debt managers make efforts to both minimize the cost of borrowing and to keep debt stock at sustainable levels. However, due to competition for funds in the continuously changing and developing financial markets, new threats and opportunities appear constantly. Public debt managers construct borrowing policies in order to minimize the cost of borrowing and also to decrease risk by using various borrowing instruments. This thesis presents a mathematical model to determine the borrowing policy that minimizes the cost of borrowing in line with future projections and then seeks to extend it to construct risk sensitive policies that allow minimizing the effects of changes in the market on the cost of borrowing. The model&rsquo / s application results for determining the borrowing strategies of Turkish Treasury for 100 month horizon have been evaluated through the study.