Performance-sensitive government bonds - A new proposal for sustainable sovereign debt management
AbstractWe argue that current sovereign debt management lacks important incentives for governments and politicians to fulfill it in a sustainable and long-term orientated way. This paper outlines that the mechanisms to solve sovereign debt problems within the EMU are not only missing the right incentives but also setting the wrong ones. In contrast to current policy, we argue that only an instrument which is sufficiently sensitive to the performance of a country (i.e. its debt level) will motivate the players to engage in sustainable debt management. Specifically, we propose performance-sensitive government bonds (PSGB) where coupon payments are closely linked to debt policy, giving strong incentives to limit debt levels and to timely restructure the economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2011-24.
Date of creation: Oct 2011
Date of revision:
Contact details of provider:
Postal: Universitätsstraße 15, A - 6020 Innsbruck
Web page: http://www.uibk.ac.at/fakultaeten/volkswirtschaft_und_statistik/index.html.en
More information through EDIRC
Sovereign debt management; government bonds; incentives; EMU; debt crisis;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-07 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Reinhart, Carmen & Rogoff, Kenneth, 2011.
"A Decade of Debt,"
CEPR Discussion Papers
8310, C.E.P.R. Discussion Papers.
- Paul De Grauwe, 2011. "A Fragile Eurozone in Search of a Better Governance," CESifo Working Paper Series 3456, CESifo Group Munich.
- Heiner Felix Mikosch & Silke Übelmesser, 2007. "Staatsverschuldungsunterschiede im internationalen Vergleich und Schlussfolgerungen für Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(4), pages 309-334, November.
- Michael Schröder & Friedrich Heinemann & Susanne Kruse & Matthias Meitner, 2007. "Pay high in good times, pay low in bad times," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(5), pages 667-683.
- Gustavo Manso & Bruno Strulovici & Alexei Tchistyi, 2010. "Performance-Sensitive Debt," Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1819-1854.
- Mayer, Thomas & Gros, Daniel, 2011. "Debt reduction without default?," CEPS Papers 4150, Centre for European Policy Studies.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janette Walde).
If references are entirely missing, you can add them using this form.