Regulating the revolving door: The case of government debt management

The revolving door is a socio-economic phenomenon whose policy salience is steadily gaining momentum among policymakers. Focusing on executive branches in charge of government debt management – debt management units (DMUs) –, this article delivers a case study systematically identifying circumstances and operations wherein the revolving door could lead to adverse side effects, and assesses whether the regulatory framework across OECD jurisdictions is adequate addressing the phenomenon’s risks. In government debt management, the revolving door is the horizontal movement of public officials to the dealers, and vice versa. Dealers are financial institutions appointed by DMUs to participate in government securities auctions, or exclusively enhancing sovereign debt market liquidity. Showing how the revolving door could exacerbate conflicts of interests inherent such principal-agent relationship, this paper reveals that the regulation in force presents limitations. Policy recommendations advocate broadening the legislation’s scope, the mandatory disclosure of public officials’ personal assets, the introduction of ad hoc cooling-off periods, and greater transparency in DMU’s ‘grey’ areas of governance. This contribution sheds light on two dimensions of policymaking. First, providing a taxonomy of circumstances wherein the revolving door poses a potential risk, the article aims at safeguarding the integrity and sustainability of sovereign debt management. Second, identifying and addressing limitations in the regulatory framework in force, the study’s overarching purpose is to steer policymakers through the ongoing process of overhauling conflicts of interest legislation.