DEBT MANAGEMENT POLICIES IN SMALL AND OPEN ECONOMIES

The role of debt management policies in small and open economics with liberalized capital movements and fixed exchange rate policies is addressed. Actual Danish debt management policy implies debt financing in domestic currency assets and it is questioned whether this is an optimal policy. The paper reviews principles for debt management policies including aspects as minimization of financing costs and risk, credibility problems, the signalling role of the debt structure and the implications for interest rate determination. It is questioned to what extent actual debt management policy has contributed to minimizing the cost and risk of debt financing and has supported the fixed exchange rate policy.