Indexed Sovereign Debt: An Applied Framework
Horacio Sapriza and
No 104, Carlo Alberto Notebooks from Collegio Carlo Alberto
In recent years, some countries have issued sovereign bonds indexed to real variables such as GDP. Moreover, there has been discussions about this issue during the European crisis. This paper analyzes the effects of introducing this type of contracts in a standard DSGE model with sovereign default risk. We solved the model numerically calibrating it to the Argentine economy and show that the introduction of GDP-indexed sovereign debt contracts reduces the probability of default and makes the government willing to hold non-contingent assets and issue real-indexed bonds at the same time. The magnitude of the welfare effect that this type of instruments could generate is equivalent to an increase of approximately half a percentage point per year in certainty equivalent aggregate consumption.
JEL-codes: E6 F41 G15 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2008, Revised 2011
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Working Paper: Indexed Sovereign Debt: An Applied Framework (2009)
Working Paper: Indexed Sovereign Debt: An Applied Framework (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:104
Access Statistics for this paper
More papers in Carlo Alberto Notebooks from Collegio Carlo Alberto Contact information at EDIRC.
Bibliographic data for series maintained by Giovanni Bert ().