Taming Debt: Can GDP-Linked Bonds Do the Trick?

Sarah Mouabbi, Jean-Paul Renne and Jean-Guillaume Sahuc

Working Papers from HAL

Abstract: We study the debt-stabilizing properties of indexing debt to GDP using a consumption-based macro-finance model. Three results stand out: (i) GDP-linked bond prices would embed sizeable and time-varying risk premiums of about 40 basis points, (ii) for a fixed budget surplus, issuing GDP-linked bonds does not necessarily imply more beneficial debt-to-GDP ratios in the medium- to long-run, and (iii) the debt-stabilizing budget surplus is more predictable under such issuances at the expense of being higher on average. Our findings call into question the view that GDP-linked bonds tame debt.

Keywords: GDP-linked bonds; debt stabilization; consumption-based model; term structure (search for similar items in EconPapers)
Date: 2020
Note: View the original document on HAL open archive server: https://hal.science/hal-04159700
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hal.science/hal-04159700/document (application/pdf)

Related works:
Working Paper: Taming Debt: Can GDP-Linked Bonds Do the Trick? (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-04159700

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().