Transformation of Public Debt Management (ToPDeM)

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Public debt looms at historically high levels in all but a few advanced economies. Unsurprisingly, worries about the size of debt burdens take centre stage. What is largely absent, is the question of HOW governments actually borrow. Why have the debt servicing costs of Greece and Spain declined throughout the past decade, despite its public debt levels (almost) doubling? Why have the UK's debt servicing costs become more exposed to inflation? How does Japan carry a debt that is 2,5 times larger than its GDP? And why does a rise in the Swiss Franc make debt servicing more expensive in Austria, but not in the Netherlands? Answers to all of these questions point to the crucial role of public debt management: how governments borrow, and not just how much. The budgetary constraints of debt (expressed in the borrowing costs) are not merely a function of debt levels, but are influenced by the ways in which public debt is planned, issued and managed. In the UK, debt interest currently amounts to £46 billion - almost the size of defence spending (£48bn). In spite of its importance, public debt management has received scant attention and continues to be clouded with technocratic obscurity. The arcane nature of public debt management has allowed consequential reforms in debt management agencies to fly largely under both public and academic radars. This study presents a comprehensive account of this overlooked revolution. Starting in the 1970s, debt management functions in advanced economies have been handed over to newly created debt management offices, which now enjoy far-reaching policy independence to manage sovereign debt. Who are these agencies which as of 2017 manage over 50 trillion US-Dollars across OECD countries? How can we explain the transformation of public debt management, both regarding institutional arrangements and new managerial practices? And what are the consequences and (growing) challenges of this silent revolution? The proposed study on the operational arm of debt management seeks to throw light into an overlooked corner of public finances. This project theorises and analyses the diffusion of new practices in sovereign debt management. It combines rigorous evidence from statistical analyses of 24 developed countries (from 1973-2018) with an in-depth comparative case study of 3 countries demonstrating variation in institutional outcome (the UK, Germany, and Denmark). In so doing, this project makes an empirical, methodological and theoretical contribution to the diffusion literature. ToPDeM aims at producing the first systematic comparative explanation of the transformation of public debt management, and will raise awareness and inform debates across civil society and within policy circles.