GDP-linked bonds and sovereign default

Using a calibrated model of endogenous sovereign default, we explore how GDP-linked bonds can raise the maximum sustainable debt level of a government, and substantially reduce the incidence of default. The model explores both the costs (in particular the GDP risk premium) and the benefits of issuing GDP-linked bonds. It concludes that significant welfare gains can be achieved by indexing debt to GDP.

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Year of publication:	2014-01-31
Authors:	Barr, David ; Bush, Oliver ; Pienkowski, Alex
Institutions:	Bank of England
Subject:	Fiscal policy \| contingent pricing \| debt management \| sovereign debt \| sovereign default

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Extent:	application/pdf
Series:	Bank of England working papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Bank of England working papers Number 484 40 pages
Classification:	H63 - Debt; Debt Management
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010839053