The Bank of England and the Government Debt

A defining feature of (at least) the last three general elections has been the emphasis placed on each political party's fiscal credibility and their ability to deliver “sound public finances”. Applying the logic of household book-keeping, balancing the fiscal budget is said to capture such soundness. There is, however, little evidence that a balanced budget is necessarily sound. Instead, the evolution of public finances depends on (1) both the fiscal choices made on the level of spending and taxation, (2) the underlying growth of the economy which depends on far more than the fiscal decisions, and (3) interest rates on government debt and the financing needs of the government. As the economic situation changes, so too does the likely path of debt to GDP and hence the possible fiscal options open to a country. Sticking to the soundbite of “sound finances” has often distracted from the underlying menu of political choices and as such is a disruptive narrative in UK economics today.

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The Resilience of Indonesia’s State Budget against Central Government Debt

Jurnal Ilmiah Administrasi Publik ◽

10.21776/ub.jiap.2020.006.02.20 ◽

2020 ◽

Vol 006 (02) ◽

pp. 325-330

Author(s):

Nugroho Suryo Bintoro

Keyword(s):

Government Spending ◽

Central Government ◽

Government Debt ◽

Infrastructure Development ◽

State Budget ◽

The Subject ◽

The Government ◽

Term Data ◽

Made In

The growth of central government debt in Indonesia is the subject of endless discussion for both economists and experts in other fields. Although the government uses this debt in order to increase Indonesia's competence through infrastructure development, there are problems in the form of previous accumulated debts. This accumulative debt is known as the concept of “debt stock” which is assessed through Indonesia's fiscal resilience (APBN) to measure the repayment capacity of new debts that will be made in the future. This ability will be seen using long-term data from 1990 to 2016 which is reflected in the variables of central government debt, government spending and revenue so that it is known that Indonesia's central government debt can still be said to be sustainable and the Indonesian government should prioritize productive expenditures in order to increase government revenues.

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DYNAMIC ANALYSIS OF REDUCTIONS IN PUBLIC DEBT IN AN ENDOGENOUS GROWTH MODEL WITH PUBLIC CAPITAL

Macroeconomic Dynamics ◽

10.1017/s1365100515000954 ◽

2016 ◽

Vol 21 (6) ◽

pp. 1454-1483 ◽

Cited By ~ 10

Author(s):

Noritaka Maebayashi ◽

Takeo Hori ◽

Koichi Futagami

Keyword(s):

Endogenous Growth ◽

Growth Model ◽

Public Investment ◽

Public Capital ◽

Government Debt ◽

The European Union ◽

Fiscal Consolidation ◽

Growth Pact ◽

Endogenous Growth Model ◽

The Government

We construct an endogenous growth model that includes productive public capital and government debt. We assume that the government debt-to-GDP ratio is gradually adjusted to a target level, reflecting the permanent commitment rules in the Stability and Growth Pact or the Maastricht Treaty in the European Union (i.e., the well-known 60% rule). These rules affect government borrowing and public investment. Here, we examine the welfare implications of the permanent commitment rules. We find that fiscal consolidation based on the rules improves social welfare. Moreover, the improvement in welfare accelerates as fiscal consolidation progresses more rapidly. Last, we also discuss and derive the optimal long-run debt-to-GDP ratio.

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How to Lose (and Regain) 3.6 Billion Euros

10.1332/policypress/9781529215144.003.0006 ◽

2021 ◽

pp. 45-50

Author(s):

Rob Kitchin

Keyword(s):

Data Entry ◽

Government Debt ◽

Housing Finance ◽

National Accounts ◽

Data Entry Error ◽

General Government ◽

Irish Government ◽

Treasury Management ◽

The Government ◽

General Secretary

This chapter imagines a conversation between two senior civil servants when they realize that the Irish government has lost 3.6 billion euros through a spreadsheet error. The Assistant Secretary of the Department of Finance reports to the General Secretary that the accountant was not sure how to classify a loan to the Housing Finance Agency (HFA) from the National Treasury Management Agency (NTMA). They had assumed that it might be adjusted for elsewhere in the General Government Debt calculations, but it was not. As such, the government debt appears twice in the national accounts, once as an asset for the NTMA and once as a liability for the HFA. The General Secretary then asks why the data entry error was not picked up. The Assistant Secretary answers that everybody assumed that somebody else had dealt with it. The accounts got returned, nobody spotted the mistake, and everyone moved onto to other tasks.

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Part I Financial Markets, 3 UK Central Banking and Financial Stability

Financial Markets and Exchanges Law ◽

10.1093/law/9780198827528.003.0003 ◽

2021 ◽

Author(s):

Morton Guy ◽

Marsh Andrew

Keyword(s):

Central Bank ◽

Financial Stability ◽

Central Banking ◽

Debt Management ◽

National Debt ◽

Legal Tender ◽

Bank Of England ◽

The Government ◽

The Uk ◽

William Iii

This chapter talks about the Bank of England as the UK's central bank, which was established in 1694 by a Charter granted by King William III and Queen Mary II under the authority of an Act of Parliament. It explains the principal object of the Act in creating the Bank as a vehicle for raising money for the government. It also discusses how the Bank was closely associated with the raising and management of the national debt since its inception, which is a function that the Bank retained until the creation of the UK Debt Management Office (DMO) in 1998. This chapter highlights how the Bank raised money by issuing of banknotes, which became widely used as a convenient means of making large—value payments. It points out that the Bank of England notes were not formally legal tender until 1833.

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Monetary easing may quicken in Brazil this year

Emerald Expert Briefings ◽

10.1108/oxan-db218047 ◽

2017 ◽

Keyword(s):

Monetary Policy ◽

Interest Rate ◽

Interest Rates ◽

Economic Recession ◽

Government Debt ◽

Domestic Demand ◽

Private Debt ◽

Content Type ◽

Positive Effects ◽

The Government

Significance At its first meeting of 2017, on January 10-11, the COPOM reduced the benchmark Selic interest rate to 13%. The 75-basis-point (bp) rate cut decision, the largest in nearly five years, accelerated the monetary easing cycle that started in October 2016. Economic recession has been relieving inflationary pressures and opening room for more intense cuts in interest rates. Impacts Further reductions of interest rates may contribute to controlling government debt. Private debt renegotiations at lower interest rates may facilitate a recovery in domestic demand and output. Any positive effects of monetary policy on activity may help contain popular dissatisfaction with the government.

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Central Banks at War

International Organization ◽

10.1017/s0020818314000265 ◽

2014 ◽

Vol 69 (1) ◽

pp. 63-95 ◽

Cited By ~ 22

Author(s):

Paul Poast

Keyword(s):

Central Bank ◽

Government Debt ◽

Central Banks ◽

Borrowing Costs ◽

The Government ◽

Credibility Problem

AbstractWar is expensive—troops must be equipped and weapons must be procured. When the enormous borrowing requirements of war make the sovereigns' credibility problem more difficult, central banks enhance a government's ability to borrow. By being the sole direct purchaser of government debt, the central bank increases the effective punishment that can be imposed on the government for defaulting on the marginal lender. This increases lenders' confidence that the government will be punished in case of default, making lenders willing to purchase the debt at a lower rate of interest. The sovereign, dependent on the low borrowing costs offered by the central bank, has an incentive to retain the bank. Data covering the nineteenth and early twentieth centuries reveal that possessing a central bank lowers the sovereign's borrowing costs, particularly during times of war.

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