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This paper analyzes institutional arrangements for public debt management by reviewing the experience of OECD countries during the late 1980s and 1990s. It discusses principal-agent issues arising from the delegation of authority from the Minister of Finance to the debt management office and describes how countries have designed governance structures and control and monitoring mechanisms to deal with these issues. The paper also discusses what lessons emerging market countries and transition countries can draw from the experience of advanced OECD countries. The OECD experience clearly indicates that-regardless of whether the debt management office is located inside or outside the Ministry of Finance-four issues are of vital importance: Giving priority to strategic public policy objectives rather than tactical trading objectives; Strengthening the institutional capacity to deal with financial portfolio management and with the public policy aspects of debt management; Modernizing debt management; Creating mechanisms to ensure successful delegation and accountability to the Ministry of Finance and Parliament. This paper-a joint product of the Office of the Senior Vice President and Chief Economist, Development Economics, and Public Debt Management Group, Banking, Capital Markets, and Financial Engineering Department-is part of a larger effort in the Bank to analyze the institutional dimentions of effective government policy.

Bank Policy --- Banks and Banking Reform --- Central Bank --- Corporate Governance --- Debt Markets --- Emerging Market --- Emerging Market Countries --- Emerging Market Economies --- Emerging Markets --- Exchange --- Exchange Rate --- External Debt --- Finance --- Finance and Financial Sector Development --- Financial Literacy --- Financial Management --- Financial Portfolio --- Financial Risks --- Institutional Capacity --- International Economics & Trade --- Monetary Policy --- Portfolio Management --- Principal-Agent Problem --- Private Sector Development --- Public and Municipal Finance --- Public Debt --- Public Debt Management --- Public Sector Economics and Finance --- Strategic Debt Management --- Trading --- Transition Countries --- Urban Development --- Urban Economics