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Debt Limits and the Structure of Public Debt

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  • Pienkowski Alex

    (International Monetary Fund, Washington, DC 20431-0001, USA)

Abstract

This paper provides a tractable framework to assess how the structure of debt instruments – specifically by currency denomination and indexation to GDP – can raise the debt limit of a sovereign. By calibrating the model to different country fundamentals, it is clear that there is no 'one-size-fits-all' approach to optimal instrument design. For instance, low income countries may find benefit in issuing local currency debt; while in advanced economies, debt tolerance can be substantially enhanced through issuing GDP-linked bonds. By looking at the marginal impact of these instruments, the paper also provides insight into the optimal portfolio composition.

Suggested Citation

  • Pienkowski Alex, 2017. "Debt Limits and the Structure of Public Debt," Journal of Globalization and Development, De Gruyter, vol. 8(2), pages 1-16, December.
    • Handle: RePEc:bpj:globdv:v:8:y:2018:i:2:p:16:n:3
    DOI: 10.1515/jgd-2017-0018
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    References listed on IDEAS

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    Cited by:

    1. Nicolas Carnot & Stéphanie Pamies Sumner, 2017. "GDP-linked Bonds: Some Simulations on EU Countries," European Economy - Discussion Papers 073, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

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    More about this item

    Keywords

    debt limits; GDP-linked bonds; sovereign debt; sovereign default; state-contingent debt;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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