Gdp Indexed Bonds

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Reviving The Case For Gdp Indexed Bonds

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Author : Mr.Eduardo Borensztein
language : en
Publisher: International Monetary Fund
Release Date : 2002-09-01

Reviving The Case For Gdp Indexed Bonds written by Mr.Eduardo Borensztein and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-09-01 with Business & Economics categories.

This paper seeks to revive the case for countries to self-insure against economic growth slowdowns by issuing GDP-indexed bonds. We simulate the effects of GDP-indexed bonds under different assumptions about fiscal policy reaction functions and their output effects and find that they could substantially reduce the likelihood that debt/GDP paths become explosive. The insurance premium would likely be small, because cross-country comovement of GDP growth rates is low and cross-country GDP growth risk is thus largely diversifiable for an investor holding a portfolio of GDP-indexed bonds. Potential obstacles to the emergence of a market for these bonds include the verifiability of GDP data, the trade-off between insurance and moral hazard, and the need for liquidity. The paper discusses institutional fixes and suggests an approach to attempting to start up a market.

Gdp Indexed Bonds

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Author : Stephany Griffith-Jones
language : en
Publisher:
Release Date : 2006

Gdp Indexed Bonds written by Stephany Griffith-Jones and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.

Optimal Gdp Indexed Bonds

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Author : Yasin Kürşat Önder
language : en
Publisher:
Release Date : 2022

Optimal Gdp Indexed Bonds written by Yasin Kürşat Önder and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.

Pricing And Hedging Gdp Linked Bonds In Incomplete Markets

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Author : Andrea Consiglio
language : en
Publisher:
Release Date : 2018

Pricing And Hedging Gdp Linked Bonds In Incomplete Markets written by Andrea Consiglio and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.

We model the super-replication of payoffs linked to a country's GDP as a stochastic linear program on a discrete time and state-space scenario tree to price GDP-linked bonds. As a by-product of the model we obtain a hedging portfolio. Using linear programming duality we compute also the risk premium. The model applies to coupon-indexed and principal-indexed bonds, and allows the analysis of bonds with different design parameters (coupon, target GDP growth rate, and maturity). We calibrate for UK and US instruments, and carry out sensitivity analysis of prices and risk premia to the risk factors and bond design parameters. We also compare coupon-indexed and principal-indexed bonds.Further results with calibrated instruments for Germany, Italy and South Africa shed light on a policy question, whether the risk premia of these bonds make them beneficial for sovereigns. Our findings affirm that designs are possible for both coupon-indexed and principal-indexed bonds that can benefit a sovereign, with an advantage for coupon-indexed bonds. This finding is robust, but a nuanced reading is needed due to the many inter-related risk factors and design parameters that affect prices and premia.

Sovereign Debt Structure For Crisis Prevention

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Author : Mr.Eduardo Borensztein
language : en
Publisher: International Monetary Fund
Release Date : 2005-01-26

Sovereign Debt Structure For Crisis Prevention written by Mr.Eduardo Borensztein and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005-01-26 with Business & Economics categories.

The debate on government debt in the context of possible reforms of the international financial architecture has thus far focused on crisis resolution. This paper seeks to broaden this debate. It asks how government debt could be structured to pursue other objectives, including crisis prevention, international risk-sharing, and facilitating the adjustment of fiscal variables to changes in domestic economic conditions. To that end, the paper considers recently developed analytical approaches to improving sovereign debt structure using existing instruments, and reviews a number of proposals--including the introduction of explicit seniority and GDP-linked instruments--in the sovereign context.

Boosting Fiscal Space

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Author : Mr.Jonathan David Ostry
language : en
Publisher: International Monetary Fund
Release Date : 2018-03-14

Boosting Fiscal Space written by Mr.Jonathan David Ostry and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-03-14 with Business & Economics categories.

Noting that the aftermath of the global financial crisis has left many advanced economies with very high sovereign debt ratios and some emerging markets with high debt, this report considers whether there are ways to expand fiscal space that do not involve countries paying down debt or promising to do so in the future, to make fiscal consolidation more growth-friendly. It explains that policymakers argue that their fiscal space is limited and that it would be difficult to take advantage of the opportunity of low interest rates to undertake fiscal expansion, and it considers a ways to raise fiscal space that does not require contractionary fiscal policy and whether there is a way to make fiscal consolidation more growth-friendly to produce larger gains in fiscal space. It argues that debt management policies may provide an answer to expanding fiscal space for a given path of primary fiscal balances by reducing the risk that a sovereign may default in bad states and generate a payoff in terms of reduced to real borrowing costs. It describes two debt management policies: issuance of GDP-linked debt and issuance of longer maturity bonds, as opposed to short-term debt. It focuses on the effect of these debt management policies on real borrowing costs and default risk for the sovereign and details the literature on GDP-linked debt and the maturity structure and how the report fills gaps in the literature; how uncertainty affects fiscal space and how debt management can play a role in increasing it, with estimates and simulations of potential gains in fiscal space flowing from debt management; and the sensitivity of the findings to underlying assumptions and policy implications.

Sovereign Gdp Linked Bonds

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Author : James Benford
language : en
Publisher:
Release Date : 2016

Sovereign Gdp Linked Bonds written by James Benford and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.

Debt Limits And The Structure Of Public Debt

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Author : Alex Pienkowski
language : en
Publisher: International Monetary Fund
Release Date : 2017-05-22

Debt Limits And The Structure Of Public Debt written by Alex Pienkowski and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-05-22 with Business & Economics categories.

This paper provides a tractable framework to assess how the structure of debt instruments—specifically by currency denomination and indexation to GDP—can raise the debt limit of a sovereign. By calibrating the model to different country fundamentals, it is clear that there is no one-size-fits-all approach to optimal instrument design. For instance, low income countries may find benefit in issuing local currency debt; while in advanced economies debt tolerance can be substantially enhanced through issuing GDP-linked bonds. By looking at the marginal impact of these instruments, the paper also provides insight into the optimal portfolio compostion.

Nominal Gdp Growth Indexed Bonds

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Author : Yongo Kwon
language : en
Publisher:
Release Date : 2019

Nominal Gdp Growth Indexed Bonds written by Yongo Kwon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.

No Arbitrage Pricing Of Gdp Linked Bonds

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Author : Fernando Eguren-Martin
language : en
Publisher:
Release Date : 2020

No Arbitrage Pricing Of Gdp Linked Bonds written by Fernando Eguren-Martin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.