Performance-sensitive government bonds - A new proposal for sustainable sovereign debt management
We 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.
|Date of creation:||Oct 2011|
|Contact details of provider:|| Postal: Universitätsstraße 15, A - 6020 Innsbruck|
Web page: http://www.uibk.ac.at/fakultaeten/volkswirtschaft_und_statistik/index.html.en
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- 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.
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"A Decade of Debt,"
Central Banking, Analysis, and Economic Policies Book Series,in: Miguel Fuentes D. & Claudio E. Raddatz & Carmen M. Reinhart (ed.), Capital Mobility and Monetary Policy, edition 1, volume 18, chapter 4, pages 97-135
Central Bank of Chile.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "A Decade of Debt," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6222, November.
- Reinhart, Carmen M. & Rogoff, Kenneth, 2011. "A Decade of Debt," CEPR Discussion Papers 8310, C.E.P.R. Discussion Papers.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "A Decade of Debt," NBER Working Papers 16827, National Bureau of Economic Research, Inc.
- 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.
- Mayer, Thomas & Gros, Daniel, 2011. "Debt reduction without default?," CEPS Papers 4150, Centre for European Policy Studies.
- Paul De Grauwe, 2012. "A Fragile Eurozone in Search of a Better Governance," The Economic and Social Review, Economic and Social Studies, vol. 43(1), pages 1-30.
- Paul De Grauwe, 2011. "A Fragile Eurozone in Search of a Better Governance," CESifo Working Paper Series 3456, CESifo Group Munich.
- Gustavo Manso & Bruno Strulovici & Alexei Tchistyi, 2010. "Performance-Sensitive Debt," Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1819-1854. Full references (including those not matched with items on IDEAS)
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