Agency costs in primary dealer systems

Arbeitspapier

Easing their access to capital markets, governments have been establishing a primary dealer system. Via bilateral self-enforcing agreements ('dealerships'), government debt management units (DMUs) have been appointing national and global banks (the 'dealers') to actively participate in government securities auctions and/or enhance liquidity in the secondary market. The partnership's non-binding and long-run nature makes dealerships relational contracts. Developing a theoretical framework, this study examines the DMU-dealer principal-agent relationship, with the overarching purpose of identifying and mitigating agency costs. Apart from monitoring costs, the article argues that the partnership entails institutional room for public-private collusion. Although the practice would help fostering the partnership's longevity, it could trigger negative externalities. Mitigating potential risks, policy proposals advocate to enhance: (i) monitoring of the dealers' behaviour in fixed income markets, and (ii) transparency in the DMU's governance of industry's benefits.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ILE Working Paper Series ; No. 69

Klassifikation und Themen

• Klassifikation: Wirtschaft ; National Debt; Debt Management; Sovereign Debt ; Contract Law ; Transactional Relationships; Contracts and Reputation; Networks ; Economics of Regulation
• Thema: public finance ; government debt management ; relational contracts ; agency costs ; dealers

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Silano, Filippo
• Ereignis: Veröffentlichung
• (wer): University of Hamburg, Institute of Law and Economics (ILE)
• (wo): Hamburg
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/268755
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ