Central bank and government debt management: issues for monetary policy by Andrew Filardo, Madhusudan Mohanty and Ramon Moreno published by BIS (2016).
The size and maturity structure of the government debt market have important implications for monetary policy, especially in EMEs. This paper documents the remarkable growth of the market over the past decade in terms of size, issuance and maturity structure of combined government and central bank debt, and notes that a large part of the official sector debt constitutes short-term securities issued by central banks to sterilise their foreign exchange interventions. The paper then explores what these trends imply for the yield curve and for bank lending behaviour, and highlights potential conflicts that may arise when the mandates of government debt managers differ from those of the central bankers.
