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GDP-indexed bonds: what are the benefits for issuing countries, investors and international financial stability?


  • B. Cabrillac
  • L. Gauvin
  • J.-L. Gossé


GDP-indexed bonds in current values (GIBs) are a type of bonds that stabilises the debt ratio in the economic cycle and thus provides the issuing countries with countercyclical room for manoeuver. To date, only GDP-linked bonds with detachable warrants that yield a compensation bonus beyond some real growth thresholds have been issued and solely associated with debt restructuring. However, interest in GIBs has grown in the context of the broad current work on the contingent debt instruments which aim at strengthening the global financial safety nets by transferring part of the macroeconomic risk to private investors. This article quantifies the gains and identifies the challenges associated with GIBs. Firstly, the debt ratios of issuing countries are stabilised. Secondly, investors benefit from the catching-up in emerging economies and can deal with currency risk that extends beyond the maturities usually covered by financial markets. On this basis, we identify countries that would provide the seedbed for the development of this new type of bonds.

Suggested Citation

  • B. Cabrillac & L. Gauvin & J.-L. Gossé, 2016. "GDP-indexed bonds: what are the benefits for issuing countries, investors and international financial stability?," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 44, pages 6-19, Winter.
  • Handle: RePEc:bfr:quarte:2016:44:01

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    References listed on IDEAS

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    Cited by:

    1. Jean-Marc Fournier & Jakob Lehr, 2018. "Issuing GDP-linked bonds: Supply and demand can match," OECD Economics Department Working Papers 1500, OECD Publishing.
    2. Nicolas Carnot & Stéphanie Pamies Sumner, 2017. "GDP-linked Bonds: Some Simulations on EU Countries," European Economy - Discussion Papers 2015 - 073, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Yongo Kwon, 2019. "Nominal GDP growth indexed bonds: Business Cycle and Welfare Effects within the Framework of New Keynesian DSGE model," National Institute of Economic and Social Research (NIESR) Discussion Papers 504, National Institute of Economic and Social Research.

    More about this item


    GDP-Indexed bonds; sovereign debt; contingent securities;

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets


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