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GPD-linked Bonds as a Financing Tool for Developing Countries and Emerging Markets

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Author Info
Schröder, Michael
Heinemann, Friedrich
Kruse, Susanne
Meitner, Matthias

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Abstract

The paper examines the applicability of GDP-linked bonds for the financing of developing countries and emerging markets. GDP-linked bonds are bonds of which the coupon and/or redemption payments are tied to the GDP of the issuing country. The study encompasses a detailed empirical analysis of their pricing behaviour, the pricing sensitivities to changes in GDP, and of their behaviour in a portfolio context is conducted. A survey amongst potential investors as well as issuing-side capital market participants assesses the prospects of success of this new type of bond. Finally, the usefulness of a partial public guarantee of payments is examined. The paper provides evidence under which circumstances, for which investors and for which countries GDP-linked bonds might be an appropriate investment vehicle. --

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Publisher Info
Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 04-64.

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Date of creation: 2004
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Handle: RePEc:zbw:zewdip:2353

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Related research
Keywords: GDP-linked bonds; bonds; development finance; public finance;

Find related papers by JEL classification:
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans and Credits
O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

References listed on IDEAS
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.:

  1. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May. [Downloadable!] (restricted)
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  2. Timothy D. Lane & Steven Phillips, 2000. "Does IMF Financing Result in Moral Hazard?," IMF Working Papers 00/168, International Monetary Fund.
  3. Steven B. Kamin, 2002. "Identifying the role of moral hazard in international financial markets," International Finance Discussion Papers 736, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  4. Eduardo Borensztein & Paolo Mauro, 2004. "The case for GDP-indexed bonds," Economic Policy, CEPR, CES, MSH, vol. 19(38), pages 165-216, 04. [Downloadable!] (restricted)
  5. Robert T. Price, 1997. "The Rationale and Design of Inflation-Indexed Bonds," IMF Working Papers 97/12, International Monetary Fund.
  6. Eduardo Borensztein & Paolo Mauro, 2002. "Reviving the Case for GDP-Indexed Bonds," IMF Policy Discussion Papers 02/10, International Monetary Fund.
  7. Schuknecht, Ludger, 1996. "Political Business Cycles and Fiscal Policies in Developing Countries," Kyklos, Blackwell Publishing, vol. 49(2), pages 155-70.
  8. Isabel Schnabel & Giovanni Dell'Ariccia & Jeromin Zettelmeyer, 2002. "Moral Hazard and International Crisis Lending: A Test," IMF Working Papers 02/181, International Monetary Fund. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. J.Ramon Martinez-Resano, 2005. "Size And Heterogeneity Matter. A Microstructure-Based Analysis Of Regulation Of Secondary Markets For Government Bonds," Finance 0508007, EconWPA. [Downloadable!]
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