Abstract
This paper analyzes the financial structure of government debt in the OECD countries from the perspective of time-consistency problems with a focus on debt held by financial institutions. Testable implications from a theoretical time-consistency model are derived and incorporated into the framework of a cost-minimizing model for public debt service. The approach is tested for a sample of 15 OECD countries over the period 1974–1989. The theoretical analysis and the empirical results show how, in addition to maturity, ownership of government debt in those OECD countries with debt accumulation problems can be related to time-consistency considerations.
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