Do parliaments have control over sovereign debt management?

Abstract

Sovereign debt management (SDM) requires decisions about the composition and structure of central government debt. Nowadays the process is delegated to professional debt management offices (DMOs), which use complex financial instruments and resort to capital markets. Parliaments in some countries have expressed concern over losing control of SDM. This article devises two indices to measure parliamentary control over SDM and DMOs’ implementation flexibility. It applies both indices to original data from 17 OECD countries. The article finds that parliaments’ legal authority over SDM and rights to information pertaining to it relate to their general power as well as economic and SDM financialisation. There is no trade-off between parliamentary strength and DMOs’ flexibility in operational decisions. These findings are of interest for research on parliamentary power, financialisation and delegation. To draw causal inferences from these associations more research is needed on the timing, politics and consequences of institutional change towards professional DMOs.

Keywords:

• Debt policy
• delegation
• financialisation
• parliamentary control
• sovereign debt management

Acknowledgements

We thank Michael Kemmerling and Hagen Kruse for their indispensable research assistance in collecting and coding the data and various DMO officials for answering our questions. Karen Andersen, Florian Fastenrath, Renate Mayntz, Leonce Röth, Fritz W. Scharpf and Michael Schwan gave us analytical advice. We also thank the participants of the CES panel on ‘Bailouts and Sovereign Debt’, Glasgow (12–14 July 2017) and the anonymous reviewers for their comments on an earlier version of this paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 An exception is Denmark, where debt management is (still) a central bank responsibility.

2 To the best of our knowledge, there are no systematic data available on the exact location of debt management prior to the reforms. Carracedo and Dattels (1997), Currie et al. (2003), Kalderen (1997), and Wheeler (2004) report some evidence but even these experts on SDM present inconsistent cross-case evidence about whether the central bank or the ministry of finance were the main or sole fiscal agent of governments in SDM.

3 These criteria also apply to our second index, which measures DMOs’ implementation flexibility. Please note that due to insufficient data (e.g. Greece) or a lack of comparability due to specific institutional characteristics (e.g. Switzerland), some OECD high-income countries could not be analysed.

Additional information

Notes on contributors

Christine Trampusch

Christine Trampusch is Professor of International Comparative Political Economy at the Cologne Centre for Comparative Politics (CCCP), University of Cologne. Her research interests include models of capitalism, labour relations, business-government relationships, the change of institutions and policies which regulate financial and labor markets, and case study methods. Her work has been published in Regulation & Governance, British Journal of Political Science, European Journal of Political Research, New Political Economy, and several other journals. [[email protected]]

Philip Gross

Philip Gross holds a PhD in Political Science from the University of Cologne and is an associate member of the Cologne Centre for Comparative Politics. His research interests are fiscal policy, budgetary policy, and public debt management. [[email protected]]