Published in:Bank of England Working Paper ; No. 484
Extent:
1 Online-Ressource (40 p)
Language:
English
DOI:
10.2139/ssrn.2388768
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 31, 2014 erstellt
Description:
Using a calibrated model of endogenous sovereign default, we explore how GDP-linked bonds can raise the maximum sustainable debt level of a government, and substantially reduce the incidence of default. The model explores both the costs (in particular the GDP risk premium) and the benefits of issuing GDP-linked bonds. It concludes that significant welfare gains can be achieved by indexing debt to GDP