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GDP-linked bonds: the bewitching song of the sirens
[Obligations indexées sur le PIB : le chant envoûtant des sirènes]

Author

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  • Sarah Mouabbi
  • Jean-Paul Renne
  • Jean-Guillaume Sahuc

Abstract

Debt-to-GDP ratios in advanced economies increased considerably during the Great Recession and the recent pandemic, and may prove to be a source of vulnerability. Commentators propose indexing the debt service to GDP growth to provide the government with an automatic stabilizer for its financing. FNew fndings suggest that GDP-linked bonds are more expensive for the government and can only prevent high tail risks in debt-to-GDP ratios in the short run. Les ratios de dette sur PIB ont fortement augmenté dans les économies avancées durant la Grande récession et la récente pandémie, et peuvent constituer une source de vulnérabilité. Certains économistes proposent d’indexer le service de la dette sur la croissance du PIB afin de fournir au gouvernement un stabilisateur automatique pour ses finances. Une nouvelle étude suggère que les obligations indexées sur le PIB sont plus coûteuses pour le gouvernement et empêchent les risques extrêmes élevés de peser sur les ratios dette/PIB seulement à court terme.

Suggested Citation

  • Sarah Mouabbi & Jean-Paul Renne & Jean-Guillaume Sahuc, . "GDP-linked bonds: the bewitching song of the sirens [Obligations indexées sur le PIB : le chant envoûtant des sirènes]," Eco Notepad (in progress), Banque de France.
    • Handle: RePEc:bfr:econot:282
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    File URL: https://www.banque-france.fr/en/publications-and-statistics/publications/gdp-linked-bonds-bewitching-song-sirens
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    File URL: https://www.banque-france.fr/fr/publications-et-statistiques/publications/obligations-indexees-sur-le-pib-le-chant-envoutant-des-sirenes
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