Pay high in good times, pay low in bad times

Michael Schröder, Friedrich Heinemann, Susanne Kruse and Matthias Meitner
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Michael Schröder: Centre for European Economic Research (ZEW), Mannheim, Germany, Postal: Centre for European Economic Research (ZEW), Mannheim, Germany
Susanne Kruse: Hochschule der Sparkassen-Finanzgruppe (University of Applied Sciences), Bonn, Germany, Postal: Hochschule der Sparkassen-Finanzgruppe (University of Applied Sciences), Bonn, Germany
Matthias Meitner: Centre for European Economic Research (ZEW), Mannheim, Germany, Postal: Centre for European Economic Research (ZEW), Mannheim, Germany

Journal of International Development, 2007, vol. 19, issue 5, 667-683

Abstract: The paper examines the applicability of GDP-linked bonds for the financing of developing countries. These bonds are characterised by tying the coupon and|or redemption payments to the GDP of the issuing country. Along with an analysis of their pricing behaviour and of their behaviour in a portfolio context, the study also encompasses a survey amongst financial experts in order to assess the prospects of success of this type of bond. Finally, the usefulness of a partial public guarantee of payments is examined. The paper provides evidence under which circumstances, for which investors and for which countries, GDP-linked bonds might be an appropriate investment vehicle. Copyright © 2007 John Wiley & Sons, Ltd.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:19:y:2007:i:5:p:667-683

DOI: 10.1002/jid.1354

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