The Growth in Government Domestic Debt : Changing Burdens and Risks

This paper analyzes the recent growth of government domestic debt, including central bank debt, using a new data base on government domestic debt in developing countries with large, open financial systems. On average, government domestic debt grew much faster than GDP between 1994 and 2004 and became larger than foreign debt. The rapid growth of domestic debt reflects financial crises, the growth of central bank debt and the greater attractiveness to governments of issuing domestic debt as well as the recent increase in demands for it. Both its attractiveness and the increased demands for it reflect the current benign international environment to some degree. The main risk of government debt, domestic or foreign, remains its overall size relative to a country's fiscal, financial, and political institutions. While government domestic debt can help the domestic private capital market, large domestic debt, like large external debt, has risks. For example, there can be "sudden stops" in the demand for domestic debt as well as in foreign lending. Governments need to be aware of the risks and burdens in domestic debt issue-crowding out small borrowers, transferring risks to banks when issuing longer maturity, fixed-interest domestic debt and reducing returns, and imposing risks on holders of pensions, annuities, and life insurance policies. Growth of central bank debt can divert central banks from pursuit of the objective of price stability.

Bibliographic Details

Main Author:	Hanson, James A.
Language:	English
Published:	World Bank, Washington, DC 2007-09
Subjects:	ACCOUNTING, AMORTIZATION, AMORTIZATIONS, ASSET HOLDING, ASSET HOLDINGS, ASSET MANAGEMENT, AUCTION, AUCTION SYSTEM, AUCTIONS, BALANCE SHEET, BANK BALANCE SHEETS, BANK CREDIT, BANK DEBT, BANK DEPOSITS, BANK HOLDINGS, BANK LENDING, BANK LOANS, BANKING CRISES, BANKING CRISIS, BANKING SECTOR, BANKING SECTOR DEVELOPMENTS, BANKING SYSTEM, BANKING SYSTEMS, BOND, BOND ISSUES, BOND MARKETS, BONDS, BOOK-ENTRY, BORROWER, BORROWING COST, BORROWING STRATEGIES, CAPITAL FLOWS, CAPITAL MARKET, CAPITAL MARKETS, CAPITAL OUTFLOWS, CAPITAL REQUIREMENTS, CAPITALIZATION, CENTRAL BANK, CENTRAL BANK BILLS, CENTRAL BANKS, CENTRAL GOVERNMENT DEBT, CERTIFICATES OF DEPOSIT, CERTIFICATES OF DEPOSITS, COLLATERAL, COMMERCIAL BANK, COMMERCIAL BANKS, COMPOSITION OF DEBT, COMPOSITION OF GOVERNMENT DEBT, CONSUMER CREDIT, CONSUMER LOANS, CONTINGENT LIABILITY, CORPORATE BONDS, CREDIT BUREAUS, CREDIT INFORMATION, CREDIT RATING, CREDIT RATING AGENCIES, CRISIS COUNTRIES, CURRENCY, DEBT HOLDINGS, DEBT ISSUANCE, DEBT ISSUE, DEBT ISSUES, DEBT OBLIGATIONS, DEBT REPAYMENT, DEBT SERVICING, DEBT SERVICING COSTS, DEBTS, DEFAULTS, DEPOSIT, DEPOSIT INSURANCE, DEPOSITORS, DEPOSITS, DEVALUATION, DEVALUATIONS, DEVELOPING COUNTRIES, DEVELOPMENT BANK, DIRECTED CREDITS, DOMESTIC BOND, DOMESTIC BORROWING, DOMESTIC CAPITAL, DOMESTIC CAPITAL MARKETS, DOMESTIC CREDITS, DOMESTIC CURRENCY, DOMESTIC DEBT, DOMESTIC DEBT MARKET, DOMESTIC DEBT MARKETS, DOMESTIC MARKET, DOMESTIC MARKETS, ECONOMIC DEVELOPMENT, EMERGING MARKET, EMERGING MARKET COUNTRIES, EMERGING MARKET DEBT, EMERGING MARKET ECONOMIES, EMERGING MARKETS, ENTERPRISE CREDITS, EQUITY MARKETS, EXCESS LIQUIDITY, EXCHANGE RATE, EXCHANGE RATES, EXTERNAL BORROWING, EXTERNAL BORROWINGS, EXTERNAL DEBT, FACE VALUE, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEVELOPMENT, FINANCIAL DEVELOPMENTS, FINANCIAL MARKETS, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FISCAL DEFICIT, FISCAL DEFICITS, FOREIGN BANKS, FOREIGN CAPITAL, FOREIGN CURRENCY, FOREIGN CURRENCY DEBT, FOREIGN DEBT, FOREIGN EXCHANGE, FOREIGN INVESTORS, FOREIGN LOANS, FOREIGN MARKET, FOREIGN MARKETS, GLOBAL DEVELOPMENT FINANCE, GLOBALIZATION, GOVERNMENT BONDS, GOVERNMENT BORROWING, GOVERNMENT DEBT, GOVERNMENT DEBT MARKET, GOVERNMENT DEBT MARKETS, GOVERNMENT GUARANTEE, GOVERNMENT GUARANTEES, GOVERNMENT SECURITIES, HOLDINGS, INFLATION, INSTITUTIONAL DEVELOPMENT, INSURANCE COMPANIES, INTEREST COSTS, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL CAPITAL, INTERNATIONAL DEBT, INTERNATIONAL FINANCIAL INSTITUTIONS, INTERNATIONAL FINANCIAL STATISTICS, INTERNATIONAL LENDING, INTERNATIONAL MARKETS, INVESTMENT FUND, INVESTMENT FUNDS, INVESTMENT STRATEGIES, ISSUANCE, LENDERS, LEVY, LIFE INSURANCE, LIFE INSURANCE POLICIES, LIQUIDITY, LIQUIDITY PROBLEMS, LOCAL CURRENCY, LONG-TERM DEBT, MACROECONOMIC CRISES, MACROECONOMIC RISK, MACROECONOMIC RISKS, MACROECONOMIC STABILITY, MARKET BORROWERS, MARKET DEBT, MARKET INFRASTRUCTURE, MARKET INTEREST RATES, MARKETABLE SECURITIES, MATURITIES, MATURITY, MICRO-CREDIT, MONETARY POLICY, MONEY MARKET, MUTUAL FUNDS, NATIONAL TREASURIES, NEGATIVE SHOCKS, OUTSTANDING DOMESTIC DEBT, PENSION, PENSION FUND, PENSION FUNDS, PENSION SYSTEMS, PENSIONS, PRICE STABILITY, PRIMARY DEALER, PRIMARY DEALERS, PRIVATE BANK, PRIVATE BANKS, PRIVATE BORROWER, PRIVATE BORROWERS, PRIVATE CAPITAL, PRIVATE CAPITAL INFLOWS, PRIVATE CREDIT, PRIVATE CREDITS, PRIVATE SECTOR CREDIT, PUBLIC BANKS, REAL EXCHANGE RATE, REPAYMENT, REPOS, RESERVE, RESERVE REQUIREMENT, RESERVE REQUIREMENTS, RESERVES, RETURNS, RISK OF DEFAULT, RURAL BORROWERS, SECURITIES, SETTLEMENT, SHORT-TERM DEBT, SMALL BORROWERS, SOVEREIGN RATINGS, STATE BANK, STATE BANKS, STOCK MARKETS, STRUCTURAL PROBLEMS, TAX, TOTAL DEBT, TRADING, TRADING SYSTEMS, TRANSITION COUNTRIES, VALUATIONS, WITHDRAWAL, YIELD CURVE,
Online Access:	http://documents.worldbank.org/curated/en/2007/09/8276407/growth-government-domestic-debt-changing-burdens-risks https://hdl.handle.net/10986/7329
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