fiscal policy question (1 Viewer)

[osak23]

hi guys

have a question

when the government borrows from the private sector to fund a budget deficit,

do they sell commonwealth government securities to banks etc??

just like Monetary policy to influence the cash rate ...or?

 

[tarod]

No.

Whey borrow from the private sector, they sell first hand government securities. This is sold under a tender system to basically anyone (people who are willing to buy at the highest price and lowest interest return are sold first until the government can fund its planned deficit.)

In the STMM, governments buy and sell second hand government securities (i.e. they have already been issued - as above - and can be traded) or repurchase agreements.

 

[osak23]

ah kk

thanks