Debt Strategy Research Articles

ОЦІНКА РІВНЯ БОРГОВОЇ БЕЗПЕКИ В УКРАЇНІ

The purpose of the article is to assess the level of debt security of the state and justify the formation of its strategy. The main element of creating an effective debt strategy is the analysis of quantitative indicators of public debt and assessment of debt sustainability of the state. Without such a study, the formation of the state debt policy strategy and management decisions will be impossible, as it will not have a scientifically sound basis. The article presents the threshold values of debt security indicators, which allow to qualitatively assess the state of debt security of Ukraine. The thresholds of the indicators form a clear concept and understanding of the level of security and the current situation and the international debt policy market. Examining the debt burden, which is formed by these indicators, you can make a forecast and redistribute cash resources in the budgets of future periods. Ukraine's debt security assessment has been performed. Based on the assessment of debt sustainability indicators of Ukraine's external public debt, a tendency to increase not only the absolute and relative indicators of Ukraine's external public debt, but also indicators that inform about the risks of deterioration of the country's debt sustainability indicators. It is established that at the moment the debt situation in Ukraine is rather unstable. The leading role in this is played not only by the amount of debt, but also its relationship with the real and financial sectors of the economy. Declining exports, declining inventories, the crisis in the euro area, and low labor efficiency increase the risk of default. The necessity of formation of optimal debt structure is proved and long-term tasks of formation of debt policy for Ukraine are defined, in particular, planning the cost of repaying and servicing public debt, planning the debt portfolio, directing state guarantees to infrastructure, establishing control over the level of international reserves, establishing the expediency of financing social expenditures and reducing financial borrowing to cover deficits and interest rates and effective exchange rate policy.

БОРГОВА БЕЗПЕКА ЯК ІНДИКАТОР РОЗВИТКУ ФІНАНСОВОГО РИНКУ УКРАЇНИ

The article reveals the essence of state debt security and examines the threats to state debt security in the context of minimizing their negative impact and increasing the efficiency of the public debt management system. In determining the essence of state debt security and the study of threats to state debt security in the context of minimizing their negative impact and improving the efficiency of public debt management system, it was determined that debt security is the basis of economic sovereignty, resilience of its financial system to internal and external threats and implementation socio-economic strategy of sustainable development. The study is devoted to identifying the features of the current system of debt security in Ukraine and a set of threats to the growth of debt security in the country. One of the financial instruments of the national economy is loans from international financial organizations, which have a targeted strategic direction of innovation. These borrowings contribute to long-term economic growth. It is the inefficient management of such debt that leads to the disruption of the economic system, in particular to its imbalance and increase its vulnerability to factors of negative foreign economic influence. Therefore, the strategic goal of reducing the threat of negative impact on debt security is to determine the optimal policy for managing both external and internal debt of the state. Again, debt management policy is a condition for the stability and efficiency of the state economy. As a result of the study, the main reasons for the deterioration of Ukraine’s debt security can be identified, in particular: a complex political crisis, military conflict, deep economic recession, the existence of obligations to meet the state’s needs in natural gas and pensions, lack of sufficient political will to reform and apply unpopular measures to stabilize the economic situation. Coordinating the public debt management mechanism with Ukraine’s financial stabilization strategy will provide an opportunity to analyze the financial threats facing Ukraine in the global crisis and develop a common framework for all bodies, public authorities, which represent the external debt of Ukraine. When appropriate measures are taken, public debt coverage will be carried out mainly not by increasing the tax burden, but by economic growth. After studying the state of Ukraine’s debt security, conclusions were drawn on its increase by stabilizing the national currency, optimizing the structure of budget expenditures, stimulating the state domestic market, directing external borrowing to implement investment development programs and developing a promising debt strategy.

Debt Instruments of Transport Leasing Companies Funding

The objective of the study is to analyze the whole range of issues related to attracting corporate financing in the debt capital market, including a description of structural features of financing leasing companies, such as the currency of financing, the use of financial instruments with a fixed interest rate, the need for matching assets and liabilities of the company, in terms of urgency. The article discusses the debt strategies of Russian leasing companies specializing in vehicles leasing. The organization of attracting funding by transport leasing companies is important for development of the entire transport industry in Russia. Bilateral bank loans, instruments of international development banks, syndicated loans and ruble bond issues are analyzed together with structural elements, investment and transactional features. Each financial instrument is followed by an example of implementation of a transaction. A comparison of the main financial instruments is followed by identification of the main advantages and disadvantages of their use for corporate financing. The methods used in the article are based on a structural approach to financing, which in turn is based on the correspondence of the financial instruments used and the goals for using cash (including replenishment of working capital, refinancing, capital costs). The main conclusion of the article is that for leasing companies the optimal financial solution is to create a capital structure by combining loans and bonds.

Problemy zadłużenia publicznego Polski na tle krajów Unii Europejskiej

The purpose of the paper is to present the main problems related public debt in Poland in comparison to EU countries. These comprise: low rating and high servicing costs, high level of foreign debt in the State Budget, high level of the deficit in central government (excluding the year 2018), high level of debt in foreign currencies open to variability in exchange rates, lack of long-term debt strategy, failure to satisfy all the requirements of accession to the EURO area, and lack of optimal debt strategy in the economic and financial sense. The current financial policy of Poland, featuring a significant increase in budget expenditures in 2019 and the following years, does not foster the solving of these problems. The direction of indebtedness of Poland after the international crisis in 2008 is not consistent with other EU countries, especially in terms of decreasing debt profitability and servicing costs. It is also related to the lack of a fixed date for accession to the euro area, i.e. belonging to a small group of countries without a common currency and low GDP level. The progress of Poland in terms of debt reduction at the end of previous century and the situation of countries having healthy public finances indicates the directions of optimization for the debt strategy. Many problems require resolution in the shorter time-horizon (about five years): reduction of debt/GDP ratio to the level from the year 2000, achieve the rating of at least A+ (according to S&P), decreasing of servicing costs to a level below 1% of GDP, and start of accession to the euro area.

Policy Forum: Newfoundland and Labrador's Debt Strategy—Waiting for a Saviour or Godot?

When the government of Newfoundland and Labrador assumed office in late 2015, it declared that the expected deficit for the current fiscal year would be almost double that which was budgeted for by the predecessor government. The new government then adopted a very aggressive fiscal-policy stance in its first budget, tabled in April 2016. However, following the finance minister's resignation in July 2017, the government seemed to dramatically change its strategy, adopting a passive policy response to the worsening deficit situation. While in subsequent years Newfoundland and Labrador's annual deficit has fallen, its net and gross debt per capita have ballooned and reached new heights relative to Canada's other provinces. This article presents an in-depth investigation of this expansion and examines the probabilities of success, in the medium and long term, of the government's current fiscal strategy as a response to its deepening debt problem.

The system of public debt management in conditions of institutional transformations

Relevance of research topic. In the context of institutional reforms, the issue of the limited state financial resources for the implementation of the tasks and functions entrusted to them by state authorities and local self-government is being updated, which predetermines the development of a system of public debt management, which is a powerful instrument of macroeconomic policy. At the same time, the growth of the level of public debt in both developed and transformational economies is conditioned by a number of factors, the most important of which are: the formation of a budget deficit that is of a permanent nature; the need for public expenditures aimed at ensuring macroeconomic stability and accelerating the pace of economic growth, the development of the social sphere. Formulation of the problem. In the context of institutional reforms, the important task is to develop a debt strategy that will ensure the concentration of limited investment resources in those sectors of the economy that will accelerate the pace of economic growth, which requires further scientific research of the theoretical and applied aspects of the formation and implementation of budgetary and debt policies, their coherence, improvement the mechanism of public debt management. At the same time, the choice of tools for managing public debt can both negatively and positively affect macroeconomic stability in the country. Analysis of recent research and publications. The problem of public debt management is rather widespread in scientific research. These are works by well-known domestic and foreign scholars: J. Buchanan, U. Mitchell, J. M. Keynes, T. Bogolib, I. Zapatrina, L. Lisyak, I. Chugunov and others. Identification of unexplored parts of the general problem. The above issues are actualized in connection with the intensification of globalization processes, the adverse external and internal economic environment, which requires the solution of a number of specific tasks related to the formation of public debt at an economically sound level. Setting the task, the purpose of the study. The objectives of the study are: to reveal the role of the system of public debt management in the regulation of socio-economic processes, to justify the relationship between debt and budget policy; carry out an analysis and assessment of Ukraine's state debt; to identify the main factors influencing the level of public debt; to clarify the provision for improving the efficiency of the mechanism of public debt management. The purpose of the study is to substantiate the priority tasks of debt policy in the context of institutional transformations. Method or methodology of conducting research. The article uses a set of methods of scientific research: system approach, statistical analysis, structuring, analysis, synthesis, and others. Presentation of the main material (results of work). The role of public debt in state regulation of social and economic development of the country is determined. The analysis and evaluation of public debt has been carried out. The priority tasks of the debt policy in the context of institutional transformations are substantiated. The field of application of results. The results of this study can be applied in the process of formation and implementation of Ukraine's debt policy, reforming the system of public finances. Conclusions according to the article. Ensuring macroeconomic stability in the country involves the development of an effective strategy for managing the public debt, justifying the strategic priorities of debt policy, based on realistic forecast indicators of the country's economic development. The improvement of the mechanism for managing public debt should be based on a clear combination of legally defined budgetary and debt policy instruments. The use of indicators of a structured, cyclically-adjusted balance can increase the validity of fiscal and debt policies. The high level of government debt and significant budget deficits create risks for financial and macroeconomic stability, their potential negative impact on economic development is far more devastating than the pro-cyclical nature of fiscal policies that only affect the economic dynamics in the short term. Accordingly, the important task of fiscal policy is to prevent the growth of public debt and budget deficit while limiting the negative impact of further fiscal consolidation on aggregate demand. The article defines the strategic priorities of debt policy in the context of institutional transformations.

Debt policy in the economic transformation

Relevance of the research topic. In the context of transformation changes, it is important to identify the priority areas of debt policy as an instrument of socio-economic development of the country, the introduction of effective instruments for managing public debt in the institutional environment. Quite important is the study on the efficiency of debt policy. Formulation of the problem. In modern conditions, during the period of financial globalization, public debt is an integral part of the financial systems of most countries of the world. Particularly important are the priorities of debt policy for countries with a transformational economy, because they need to allocate a significant amount of financial resources to carry out and achieve effective results of reforms. It is important to develop and implement a coherent debt strategy, as well as to correct it for solving current problems. Analysis of recent research and publications. The issue of debt policy of the state is quite relevant today for the majority of countries of the world and are common in scientific works of the well-known foreign and domestic scientists. The following foreign scientists have made a significant contribution to the study of public debt and debt policy: R. Barro, D. Buchanan, A. Wagner, J. Keynes, D. Ricardo, P. Samuelson, J. Stiglitz, W. Thompson, F. Friedman and others. The theoretical and practical questions concerning the formation, management and maintenance of public debt under conditions of transformational changes in the economy are devoted to the work of such Ukrainian scientists as O. Vasylyk, I. Zapatrina, L. Lisyak, I. Lukianenko, A. Mazaraki, M. Pasichnyi, V. Fedosov, I. Chugunov and others. Selection of unexplored parts of the general problem. However, there are a number of underdeveloped issues related to the formation and repayment of public debt in the context of the transformation of the economy in both the medium and long-term periods. Setting the task, the purpose of the study. The research objective is to analyze the state debt of Ukraine as a result of the implementation of debt policy. The purpose of the study is to determine the main tasks of the debt policy of Ukraine. Method or methodology for conducting research. The combination of research methods were used in writing the article: systematic approach, statistical analysis, structuring, analysis and synthesis, and others. Presentation of the main material (results of work). Indicators of state and state-guaranteed debt in terms of repayment currencies, the structure of domestic government loans that were raised to the budget by placing bonds on the primary market were analyzed in the article. The priority tasks of the debt policy in the medium and long-term perspective were proposed. The field of application of results. The results of this study can be applied in the process of formation and implementation of Ukraine's debt policy. Conclusions according to the article. At the present stage of economic development it is important to increase the impact of the use of debt management methods based on the formation of the debt policy priorities for the medium and long term persrective. In carrying out an effective debt policy, the government should reduce the spread of crisis phenomena and debt risks, as well as reduce the total debt burden on the economy. The article defines the priority tasks of Ukraine's debt policy in the medium term.

STRATEGI MANAJEMEN SEBAGAI FAKTOR MITIGASI DALAM PENERIMAAN OPINI AUDIT: Studi empirik pada Perusahaan Manufaktur di Indonesia

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A Tale of Two Properties: Debt Strategies for Financing Commercial Real Estate

Stanley Cirano owns two retail shopping centers in suburban Chicago. With interest rates near all-time lows in late 2015, Cirano believed it was an opportune time to consider the debt financing of his properties. Although the properties were similar in many respects, the lenders willing to lend against each property were offering noticeably different terms. Cirano had to consider not only the interest rate and size of each potential loan, but also the various fees, potential prepayment penalties, and variations in recourse to make the best decision for each property.

Public Debt Management in Selected Central East Europe Countries

Abstract Public debt management represents an important part of public finance in each economy and in most countries is in administrative authority within the Ministry of Finance. The Public Debt Administration is the holder of public debt policy, presenting one of the most important branches of macroeconomic policy and has stabilization and developmental function. The Public Debt Management determines the schedule, scope and currency structure of the security issuance in the domestic and international financial markets and directly affects the level of indebtedness of the country and the level of foreign exchange risk. The main objective of public debt management is to ensure that the government’s financing needs and its payment obligations are met at the lowest possible cost over the medium to long run, consistent with a prudent degree of risk. Adequate public debt management is crucial in view of the severe macroeconomic consequences of non-enforcement of public debt and the potential expansion of instability to other sectors in an economy. All this indicates the need for an adequately setting up current and future public debt management strategy and the development of instruments to reduce borrowing costs and foreign exchange risk levels. The aim of this paper is to present public debt management in selected Central East Europe countries (Serbia, Hungary, Croatia, Albania and Slovenia) and to recommend further improvement of its public debt strategies.

Is the market really a good teacher?

This paper proposes to model market mechanisms as a collective learning process for firms in a complex adaptive system, namely Jamel, an agent-based, stock-flow consistent macroeconomic model. Inspired by Alchian's (1950) blanketing shotgun process idea, our learning model is an ever-adapting process that puts a significant weight on exploration vis-a-vis exploitation. We show that decentralized market selection allows firms to collectively adapt their overall debt strategies to the changes in the macroeconomic environment so that the system sustains itself, but at the cost of recurrent deep downturns. We conclude that, in complex evolving economies, market processes do not lead to the selection of optimal behaviors, as the characterization of successful behaviors itself constantly evolves as a result of the market conditions that these behaviors contribute to shape. Heterogeneity in behavior remains essential to adaptation in such an ever-changing environment. We come to an evolutionary characterization of a crisis, as the point where the evolution of the macroeconomic system becomes faster than the adaptation capabilities of the agents that populate it, and the so far selected performing behaviors suddenly cease to be, and become instead undesirable.

TAX AND DEBT STRATEGY OF FISCAL REGULATION OF THE TRANSITIVE ECONOMY

Topic . In modern circumstances, it is especially the acute question of developing new priorities ensuring the dynamic development of the economy. Among the tools of state regulation of economic growth, it is of special importance ensuring an efficient interaction of fiscal and debt policy. The article examines the problem of establishing an optimal balance between taxation and public borrowing to solve the optimization problem of financial provision of the state’s functions and maximizing GDP growth. Purpose . Taxation is an alternative source of replenishment of the budget to government borrowings. In the article, the author proposes new approaches to the formation of tax and debt policies. Also, it is grounded the most desired quantitative relation between tax and debt burden. Methods . In the article, we used a content analysis of the optimization and descriptive analytical models of the relationship of fiscal expansion (spending) of the state and economic growth. We used economic and mathematical models of the tax and debt strategies. Based on the comparative analysis we assessed the ability of tax to ensure the functioning of the state against the potential fiscal effect of economically justifiable government borrowing and the total amount of expenses of the budget. Results . The use of these models allowed comparing the evaluation of future debt burden under different parameters of economic development and match them with possible values of the tax burden. Derived indicators can be compared with the permissible values of indicators of the safe level of debt. It has practical meaning, both for national security and for identifying opportunities for the placement of new loans. Conclusions . The strategy of tax policy should be based on scientific methodological principles of fiscal relations between taxpayers and the state. Government borrowing is advisable to use exclusively for funding capital investments. Social expenditures, which are not secured by tax revenues and/or state borrowing, definitely needs to be reviewed in accordance with criteria of fiscal adequacy, economic efficiency, and social justice.

Optimal investment strategy with debt financing under stochastic interest rates

We study an approach that can be applied by firms' managers in order to make more effective decisions on investment and debt strategies with the consideration of fluctuating interest rates. We model by a stochastic differential equation in which the drift varies in response to expanded investment and outstanding debt. In the optimization of the investment-debt policy, we consider a continuous stochastic interest rate as a discounting factor. One of our findings is that the optimal condition to consider debt financing for investment is when the liquidity level and the liquidity drift are high while the interest rates are low. Also, there are two limiting points over the liquidity level domain whereby below the lower point and above the upper point it is not optimal to consider debt financing for investment. Over the liquidity-drift range we find a point above which debt financing is optimal and also having an interest rate below the threshold value is optimal for debt financing. The suggested approach is more suitable for managing growing firms in the developing economies where the macroeconomic effects are more intense and firms rely more on debt financing over equity financing. Firms' managers have to consider the liquidity level, liquidity drift and the interest rates before embarking in debt financing for investment, while the monetary policy makers in developing economies have to ensure low interest rates in order to favour firms' investment growth.

Debt Strategy Trends of Emerging Market Firms

Different industry sectors have high degree of variation with respect to financial leverage. The excessive use of financial leverage by firms had played a paramount role in the 2008 financial crisis. This study examines the average debt intensity of different industrial sectors during different time period. The study was based on a sample of approximately 20,000 companies representing 19 different industry sectors. The study explores whether there exist persistent differences in leverage ratios across different industry sectors in India. The study examines whether the leverage measures of the Indian firms have changed during different period of analysis. The study also examines the determinants of an optimal capital structure. Electricity sector is the most debt intensive sector among the different industry sectors. Communication, construction and real estate sectors were the next debt intensive sectors among the Indian industrial sectors. The average debt equity ratio of all the industry sectors was 16.57 reflecting the high debt intensity characteristics of Indian Industry. The mean debt equity ratio ranged from 1.45 (Machinery & Transport) to 85.64(Electricity) during the period 2005-2016. The average return on capital employed was negative for all the sectors during the period 2000-2016 except for electricity sector. The average leverage of 10 industry sectors increased in the period 2010-2016 compared to the period 2000-2009. The study document statistically significant variation in mean leverage ratio for industry sectors like communication, construction and real estate, electricity and miscellaneous manufacturing. The most leverage intensive sector construction and real estate sector was the only sector with positive average return on capital and had highest cash flow intensity during the period 2010-2016. Regression results finds statistically significant negative relationship between profitability and leverage. Less profitable firms tend to use more financial leverage. Firms that have more profits tend to have lower leverage. This result is in line with pecking order theory. Some evidence suggest that debt ratio is inversely related to the costs of financial distress. Firms with higher discretionary expenditures tend to have higher cash flows and hence lower costs of bankruptcy. Textile, metal, financial services, electricity and consumer goods are highly debt intensive industries.

Soft transactions

This paper considers “soft debt” as a social convention that facilitates long-term reciprocal relationships. A player is said to follow a soft debt strategy if his decisions depend on the entire history with his counterpart only through their accrued soft debt balance. Under discrete benefits, there exist equilibria in which the players keep reciprocating as long as the debt balance does not exceed a certain limit.

Corporate Leverage: Structural Equations Framework in an Emerging Economy

Purpose The purpose of this paper is to investigate the financing behavior of firms in Pakistan. Previous studies have investigated corporate leverage determinants within any particular industry, such as manufacturing industry, textiles industry, etc., with varying results. This is one of the few studies that examine the determinants of leveraging attitude of firms across industrial sectors for textiles, large industries, and small industries. Thus, the study provides an insight into the general debt financing behavior in Pakistan and allows a basis for comparison of the leveraging decisions across industries. Design/methodology/approach The study employs the structural equations methodology which captures the endogenous relationship between profitability and leverage. Thereby, eliminating bias and providing more accurate results. Findings The findings suggest that the leveraging decisions differ across sectors and that each industry has its own distinctive debt requirements/characteristics. The authors conclude that a singular approach taken by investors and analysts would provide inaccurate assessment of firms’ debt financing policies and strategies. Research limitations/implications There is a limitation on data availability in emerging countries, and a larger sample would have provided more robust results. Therefore, the study has only taken three sector sub-divisions, and more industry categories would have provided in-depth insights into the industry-wise leveraging behavior. Practical implications This is the first study to suggest that the borrowing attitude of firms differ across industries and vary due to their specific needs. This has implications for government regulators, investors, and creditors in providing a more customized approach to analyzing and meeting the external financing needs of firms. Originality/value This study is the first to use simultaneous equations model to eliminate bias that is prevalent in similar studies in Pakistan. The SEM captures the endogenous relationship between profitability and leverage. The research provides important information about the underlying financing behavior across industries, which has largely been ignored.

An Assessment and Measurement of Risks in the International Airline Industry: A Study of the ICAO Carriers Over the Period, 1990-2013

A prior study by one of the authors (Gritta, et. al. 2006) published in the Journal of the Transportation Research Forum, examined the extent of operating, financial, and total leverage facing the major U.S airlines, those carriers with total revenues of $1.0 billion or more. The study found that the vast majority of the carriers were highly leveraged at both the operating and financial levels and that this resulted in highly unstable profitability and increased the dangers of bankruptcy. The global airline industry has always been highly cyclical and somewhat fixed-cost driven. Airlines are thus high in what financial analysts refer to as operating leverage. In addition, the many airlines have followed aggressive debt strategies; that is, they have chosen to use large amounts of long-term debt finance to purchase assets. This results in a high degree of financial leverage. In the past, the resulting combined leverage has created severe financial problems for major carriers, both domestically and internationally.The current study seeks to examine a sample of foreign carriers in order to measure the extent of risks on the international level. In doing so, comparisons will be made to the large U.S. carriers. If possible, the authors will use the same time horizon as in the published paper, although in some cases carriers are too new to have such a history.

Koncepcje modernizacji: zarządzania długiem publicznym oraz strategii długu

High or excessive level of public debt results in permanent difficulties for public finance, especially: tension in state budget (in the consequence of high servicing costs), necessity of activation of reserves, limitation in some expenditures. Moreover, it deteriorates conditions of operating of economy, as a result of: reduction of credit, increase of taxation, decrease of rating (causing of increase of interest rates). High, subcrisis level of debt requires effective – optimal – system of management and strategy. The debt management consists of: determining of debt level and structure, accordingly to the type of instruments and creditors and financial flows resulting from the debt. The main purpose of the management is minimization of servicing costs, under constraints for risk level, especially interest rate, and satisfying of conditions about required debt features. Debt strategy takes into account macroeconomic targets and conditions; the basic is maximization of welfare. Realization of purposes of debt management is the complex decision problem – it requires formulation of coherent set of optimization problems. They can be solved with a use of mathe-matical programming methods and theory of games. Formulation of numerical form of optimization problems require application of analytic, diagnostic and forecasting methods, based on statistics, econometrics and computational intelligence. Important part of debt optimization is also experts’ component. In the author opinion it is not possible to guarantee actual optimization of debt management and strategy without application of the mentioned above methodology. Lack of optimality indicates significant losses for the public finance, especially as a result of excessive servicing costs (their level approach the level of 50 milliards of Polish zlotys).

МАКРОЭКОНОМИЧЕСКИЕ ПОСЛЕДСТВИЯ РОСТА ГОСУДАРСТВЕННОГО ДОЛГА ДЛЯ РОССИЙСКОЙ ЭКОНОМИКИ

The paper represents a complex analysis of public debt as one of the major tools of microeconomic policy, through which a modern state can directly or indirectly affect the condition and development of the national economy.The analysis results are given for modern concepts explaining how the amount of public debt affects microeconomic development. It is shown that a growing public debt may cause both a positive and a negative effect on microeconomic processes, which makes it possible to reach a conclusion about the contradictory character of debt funding the economy.The essence and nature of the Russian Federation’s public debt is revealed as an important component of the Russian economy’s operating mechanism at the present time.The RF public debt dynamics are presented and projected values of its growth are given for the years 2016-2018.A brief description of the characteristics of RF debt policy is provided. It is noted that one of its objectives for the next few years is the need to adapt to the changing conditions in the external and domestic financial markets.One hazard of growing public debt is identified given the structural misbalances and external economic shocks, since it may result in a bigger dependence of the national economy on external and internal borrowings, which, in turn, will provoke additional risks for the development of the Russian economy.It is shown that in the countries with developing markets, growing public borrowings may cause negative macroeconomic consequences. It is proven that in order to enhance the stimulating effect of public debt on the macroeconomic processes the state needs to develop an efficient debt strategy, which would clearly define the economic boundaries of public debt use.

The Financialisation of Sovereign Debt: An Institutional Analysis of the Reforms in German Public Debt Management

This study explores the financialisation of sovereign debt through an in-depth study of institutional change in German debt management. Between 1998 and 2006, the Ministry of Finance fundamentally altered the management of federal public debt by not only disempowering the Bundesbank and Federal Debt Administration as debt managers and outsourcing this task to a new agency, the Federal Finance Agency; moreover, the conservative debt strategy was replaced by strict market orientation. Conceptualising this change as institutional innovation, the paper argues that the Ministry of Finance played a leading role in the reform process. It shows that the arrival of the Euro brought with it a power struggle between the Ministry and the Bundesbank. The evidence fits better the concept of institutional innovation as a result of entrepreneurship than approaches which conceptualise institutional innovations as consequences of profit maximisation or layering and displacement.