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Debt Limits and the Structure of Public Debt

Author

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  • Alex Pienkowski

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 compostion.

Suggested Citation

  • Alex Pienkowski, 2017. "Debt Limits and the Structure of Public Debt," IMF Working Papers 2017/117, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2017/117
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=44913
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    Cited by:

    1. Alina-Georgeta AILINCA, 2018. "Suggesting Some Indicators For A Better Measurement Of Public Debt Sustainability," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 3(3), pages 213-222.
    2. 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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