Pay high in good times, pay low in bad times
The paper examines the applicability of GDP-linked bonds for the financing of developing countries. These bonds are characterised by tying the coupon and|or redemption payments to the GDP of the issuing country. Along with an analysis of their pricing behaviour and of their behaviour in a portfolio context, the study also encompasses a survey amongst financial experts in order to assess the prospects of success of this 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. Copyright © 2007 John Wiley & Sons, Ltd.
Volume (Year): 19 (2007)
Issue (Month): 5 ()
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References listed on IDEAS
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- Gelos, R. Gaston & Sahay, Ratna & Sandleris, Guido, 2011.
"Sovereign borrowing by developing countries: What determines market access?,"
Journal of International Economics,
Elsevier, vol. 83(2), pages 243-254, March.
- R. G Gelos & Guido M Sandleris & Ratna Sahay, 2004. "Sovereign Borrowing by Developing Countries; What Determines Market Access?," IMF Working Papers 04/221, International Monetary Fund.
- R. Gaston Gelos, Ratna Sahay and Guido Sandleris, 2008. "Sovereign Borrowing by Developing Countries: What Determines Market Access?," Business School Working Papers 2008-02, Universidad Torcuato Di Tella.
- Eduardo Borensztein & Paolo Mauro, 2002. "Reviving the Case for GDP-Indexed Bonds," IMF Policy Discussion Papers 02/10, International Monetary Fund.
- Susanne Kruse & Matthias Meitner & Michael Schroder, 2005. "On the pricing of GDP-linked financial products," Applied Financial Economics, Taylor & Francis Journals, vol. 15(16), pages 1125-1133.
- Schuknecht, Ludger, 1996. "Political Business Cycles and Fiscal Policies in Developing Countries," Kyklos, Wiley Blackwell, vol. 49(2), pages 155-170.
- Giovanni Dell'Ariccia & Jeronimo Zettelmeyer & Isabel Schnabel, 2002. "Moral Hazard and International Crisis Lending; A Test," IMF Working Papers 02/181, International Monetary Fund.
- 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.).
- Robert T Price, 1997. "The Rationale and Design of Inflation-Indexed Bonds," IMF Working Papers 97/12, International Monetary Fund.
- Atkinson, A. B. (ed.), 2004. "New Sources of Development Finance," OUP Catalogue, Oxford University Press, number 9780199278565.
- Steven T Phillips & Timothy D. Lane, 2000. "Does IMF Financing Result in Moral Hazard?," IMF Working Papers 00/168, International Monetary Fund. Full references (including those not matched with items on IDEAS)
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