Public debt management in developed economies during the crisis

The aim of this chapter is to identify certain shifts in the behaviors of public debt managers in selected developed countries. This study focuses on Canada, France, the United Kingdom, and the United States for the period 1998–2015 in quarterly data. The behaviors are described using a reaction function to cost and risk considerations on the share of short-term debt. We estimated these behaviors using a Kalman Filter-Maximum Likelihood approach. Our results showed that public debt management behaviors in developed countries have changed since 2001 in response to the financial and economic crisis. Nevertheless, the impact of the crisis on the public debt management behavior is heterogeneous across countries. For example, public debt management behavior in France is characterized by cost optimization while public debt management behavior in Canada is less sensitive to interest rates. This study also highlighted that short-term debt is a backup plan when there are problems within the bond market.