Debt Management Policies Research Articles

Debt management and crisis in developing countries

Debt management policy for governments of developing countries must balance conflicting objectives. The structure of explicit and implicit government debt influences the amount of lending private creditors are willing to extend, contractual debt service costs, the probability of default and the costs of default. Because default is not relevant for governments of industrial countries, their debt management policies are not a useful guide for developing countries. The model developed suggests that minimizing debt service costs is likely to be a very inefficient policy for governments of developing countries because such a policy increases the cost of default.

Fiscal Debt Management, Accumulation and Transitional Dynamics in a CGE Model for Turkey

ABSTRACT We use a dynamic general equilibrium model based on intertemporally optimizing agents to study alternative debt management policies for the Turkish economy. The model is based on the neoclassical growth theory in its adjustment to steady state dynamics, and on Walrasian general equilibrium theory of a small open economy in attaining equilibrium in its commodity and factor markets. Key features of the model are its explicit recognition of the distortionary consequences of excessive borrowing requirements of the public sector through increased domestic interest costs; and endogenous determination of the private work force participation decisions in response to changing tax incidences. The model results suggest that reliance on indirect taxes, as in the current stance of the fiscal authority, has appealing results in terms of attaining fiscal targets, yet it suffers from distortionary consequences and loss of economic welfare.

BETAS AND DEBT MANAGEMENT WITHIN THE UK TAX ENVIRONMENT

Tax complexities relating to corporate tax losses, induced by debt finance, and to the differential tax treatment of equity and sterling debt, are introduced into corporate valuation. The after personal tax value of the geared firm can be less than that of the equivalent ungeared firm. Also, debt-induced tax losses can create negative betas. These fiscal effects are incorporated into degearing formulae under active and passive debt management policies.

Value Under Active and Passive Debt Management Policy

The relationship between debt policy and valuation has been extensively analysed in the finance literature; within a Modigliani‐Miller framework, the consensus is that valuation is affected by whether debt is managed actively or passively, and that for finite projects with time varying risky cash flows, it is appropriate to use a weighted average discount rate for valuation only if it is assumed that debt is actively managed. In this paper, the relationship between debt policy and valuation is re‐examined. In particular, it is shown that, under one of the most plausible forms of passive debt policy, valuation using a simple weighted average discount rate is in fact possible.

Assessing and managing external debt problems in Nigeria

The paper addresses some of the major issues in external debt management from the point of view of a borrowing country. It has been found that frequent occurrence of debt and debt-servicing problems among less developed countries (LDCs) can be traced to poor debt management. Despite the awareness of the need to develop an effective debt management capability and formulate specific debt management policies, formal debt models have yet to enjoy wide application in many African countries. Whereas there are many debt management systems which debtor countries can adopt, most African countries are not using them because of several constraints. An analytical framework which can be used to formulate sound debt management policies is proposed and applied using Nigeria as a case study.

Does Debt Management Matter?

Part 1 Does debt management matter?, Jonas Agell and Mats Persson: some general concepts the portfolio balance approach to debt management implementing the basic model by using historical data an alternative approach to the covariance matrix how returns adjust - the effects of endogenous prices comments, Jeffrey A. Frankel and Benjamin M. Friedman. Part 2 Debt management policy, interest rates and economic activity, Benjamin M. Friedman: debt management, interest rates and asset prices a model of interest rates and economic activity empirical assessment of the effects of debt management policies comment, Staffan Viotti.

Does Debt Management Matter?

Part 1 Does debt management matter?, Jonas Agell and Mats Persson: some general concepts the portfolio balance approach to debt management implementing the basic model by using historical data an alternative approach to the covariance matrix how returns adjust - the effects of endogenous prices comments, Jeffrey A. Frankel and Benjamin M. Friedman. Part 2 Debt management policy, interest rates and economic activity, Benjamin M. Friedman: debt management, interest rates and asset prices a model of interest rates and economic activity empirical assessment of the effects of debt management policies comment, Staffan Viotti.

The Paradox of State Power in Africa: Debt Management Policies in Kenya and Zimbabwe

A central debate in the literature on the state has focused on the state's relative strength and weakness in relation to society (Skocpol 1979; Nordlinger 1981, 1987; Evans, et al., 1985; Carnoy 1984). While this debate initially examined developed states and, more recently, semi-industrialized states in Latin America, increasing attention has shifted to African states. It is here where a paradox has emerged that has generated further questions about state power and state-society relations. Africa is plagued with political instability, coup d'etats, deteriorating economic conditions, and ineffective policy implementation (Sandbrook 1985). The current difficulties in meeting scheduled debt repayment deadlines and the pressure to make significant economic adjustments further illustrate the precarious financial status of many African states. Yet, African societies are well known for their heavily centralized bureaucratic apparatus that consumes a substantial portion of expenditures and capital investments. One indicator of state influence is the steady growth of parastatals in African countries. As they have expanded in number and in function, state power over these firms also has grown. And, in response to rapidly deteriorating economic conditions, many African states have enacted widescale debt management controls on foreign investment, public borrowing, and public sector investment. Scholars, whether conceptualizing this influential social group as an “organizational bourgeoisie” or a “managerial bourgeoisie,” consider African state bureaucracies to have their own power capabilities and defined interests (Markowitz 1977; Sklar 1979).

Foreign debt, debt management policy and implications for Hungary's development

(1992). Foreign debt, debt management policy and implications for Hungary's development. Soviet Studies: Vol. 44, No. 6, pp. 997-1013.

Discipline and punish: the new right and the policing of the international debt crisis

This paper explores the ways in which a climate of ideas associated with the New Right has enabled the policing of the developing countries' debt crisis to proceed in a manner which is (by other lights) unstable and unjust. Its point of focus is a body of work which encourages us to see the debt crisis as a punishment visited on countries which have departed from the norms of economic and political liberalism, and which proposes to treat such countries accordingly. Particular attention is paid to the linguistic tropes by and through which the New Right has diagnosed and proposed to correct the debt malaise. This paper comprises five sections. After a brief Introduction, Section 2 considers how the discourse of development studies has begun to succumb to a set of ideas and policies associated with the New Right: the so-called counter-revolution in development theory and policy. Section 3 examines the importation of these ideas in the debates on LDC debt and on the debt management policies enacted by the creditor powers and institutions. Particular attention is paid to questions of economic forecasting and equilibrium models, to the theorem of the second-best, and to the notion of just deserts. Section 4 presents an internal and an external critique of New Right perspectives on the debt crisis. Section 5 concludes this paper. It reflects upon the power of ideas in contemporary economic and political life; it also commends the formation of ideas and policies which set themselves against the punitive disciplines of the New Right.

Beta Geared and Ungeared: Further Analysis of the Case of Active Debt Management

Abstract This paper extends previous work by Appleyard and Strong (1989) concerned with the implications of an active debt management policy (ADMP) for de-gearing a geared firm's equity beta. First, alternative derivations of the ADMP beta de-gearing formulae for an MM perfect capital market with corporation tax and for a world with corporation and personal taxes are presented. These derivations do not require the assumption of level perpetuity expected cash flows and therefore indicate a broader basis for the ADMP beta de-gearing formulae than previously demonstrated. Secondly, possible investor valuation errors from use of a PDMP (passive debt management policy) valuation methodology to value firms pursuing an ADMP are analysed in the context of an MM perfect capital market with corporation tax. Given constant (or zero) growth in the firm's expected unlevered cash flows, this analysis indicates that degearing errors from use of the PDMP beta de-gearing formula will only be associated with valuation erro...

Endogenous fertility, Ricardian equivalence, and debt management policy

The paper develops a model in which dynastic families optimally determine fertility. Government debt represents a tax on future generations and on childbearing; the Ricardian Equivalence Hypothesis does not hold. Debt is welfare reducing in that it distorts the fertility decision. An increase in government debt induces a decline in fertility and an increase in the steady state capital/labor ratio. If a government inherits an existing stock of debt, the first-best policy is to eliminate the debt immediately. In other situations the optimal debt management policy will not, in general, entail a total elimination of the debt.

State Debt Management Policy: A National Survey

The amount of outstanding, long‐term, tax‐exempt state debt has grown precipitously over the last decade, from $87 billion in 1977 to $264 billion in 1987. But there have been few attempts to carry out broad studies of basic state debt management policies, using comparative state data. As a result, policy‐makers lack guidance as they attempt to adjust policies and procedures to meet the rapidly evolving requirements associated with public borrowing. This paper reports on a national survey of state debt manage ment policies ‐ policies devoted to the planning, preparation, sale, and repayment of debt for which states consider themselves responsible.

Patient debt management and student academic progress

A survey of the patient debt management policies of all U.S.-accredited dental and dental hygiene educational programs was taken to assess institutional patient debt management procedures and their relationship to student academic progress. The policies were evaluated to determine the level of compliance with existing standards and to analyze them in light of their legal implications relative to student rights. The results illustrated a vast breadth of policies for both dental and dental hygiene programs, ranging from no relationship between debt management and student progress, to an unspecified relationship, to a formal relationship whereby academic progress is conditional on collection of patient fees. The question of the legal validity of conditioning academic progress on third party payments for services was then examined. It is the opinion of the authors that the translation of a student's successful performance in a clinic setting to an academic failure or incomplete based on a patient's failure to pay for services is likely not legally defendable. Thus, it is essential that policies on fee collection and patient debt management not be tied to issues of student academic progress.

Beta Geared and Ungeared: The Case of Active Debt Management

Abstract This paper extends the results of Buckley (1981) and Schnabel (1983) on the relationship between geared and ungeared betas. We contrast a passive debt management policy with an active debt management policy and derive the relevant beta degearing formulae for the case of an MM perfect capital market with corporation tax. We also extend these results to a world with personal taxes and debt related costs.

Towards a public debt policy in Italy

This paper represents the full report of a committee chaired by Luigi Spaventa, prepared for and presented to the Italian Treasury ministry in July 1989. The report falls into five chapters: the reasons for a public debt management policy in Italy; debt management policy and monetary policy - some institutional changes; types of securities; the working of the markets; institutional and organisational aspects of debt management.

Réforme de la politique d'émission et de gestion de la dette publique en France (1985-1987)

Reform of the French public issues and debt management policy (1985-1987) The author explains and analyzes the latest reform of the French public issues and debt management policy. This policy, which is mainly concentrated on negotiable instruments, modernize the different issuing methods and create new products. Within the framework of the reform, a network of "Treasury securities professionals" has been set up. The paper includes also many statistical series on the recent trend of public debt and an international comparative analysis.

FITTING MONEY INTO CONVENTIONAL MACROECONOMIC MODELS

Conventional macroeconomic models disregard both the distinction between liquid and investment assets and the unique f eature of money as that liquid asset that serves as the means of paym ent. This paper incorporates both features into a four-asset dynamic IS-LM model. After imposing the additional restrictions suggested by the two distinctions on the structure of the model, the paper goes on to use the revised model to investigate the effectiveness of monetar y, fiscal, and debt management policy. It is shown that both distinct ions influence the effectiveness of policy. The results are compared with current wisdom on related issues. Copyright 1987 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Corporate Debt Management and the Value of the Firm

Three alternative characterizations of corporate debt management policy, which have had wide currency in the literature, are examined. They are shown to give rise to substantial differences in their predictions of total-firm value. This study concludes that, of the three, the one that assumes that management periodically rebalances the firm's debt levels in response to evolving new information on expected future operating cash flows is the most logically consistent. On that basis, a reinterpretation of the available empirical evidence on the “tax effect” of debt is indicated.

Public debt management policy and nineteenth-century American economic growth

Public debt management policy and nineteenth-century American economic growth