Sovereign GDP-Linked Bonds

23 Pages Posted: 30 Sep 2016

See all articles by James Benford

James Benford

Bank of England

Mark Joy

Bank of England

Mark Kruger

Government of Canada - Bank of Canada

Tom Best

Bank of England

Multiple version iconThere are 2 versions of this paper

Date Written: September 26, 2016

Abstract

While the idea of governments issuing financial instruments whose repayments are indexed to gross domestic product (GDP) is not new, the current global backdrop of high sovereign debt coupled with low interest rates and weak and uncertain nominal growth prospects suggests the case for doing so may be especially strong now. This paper discusses the pros and cons of GDP-linked bonds, looks at when it might be most beneficial to issue, how investors might benefit, and possible ways of addressing the first-mover problem. The aim of this paper is to stimulate debate rather than provide answers.

Keywords: Sovereign Debt, Sovereign Default, Fiscal Policy, Debt Management, GDP-Linked Bonds

JEL Classification: E62, F34, G12, G13, G15

Suggested Citation

Benford, James and Joy, Mark and Kruger, Mark and Best, Tom, Sovereign GDP-Linked Bonds (September 26, 2016). Bank of England Financial Stability Paper No. 39. Available at SSRN: https://ssrn.com/abstract=2843686 or http://dx.doi.org/10.2139/ssrn.2843686

James Benford (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Mark Joy

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Mark Kruger

Government of Canada - Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Tom Best

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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