Growth-Indexed Bonds in Emerging Markets: a Quantitative Approach
In the aftermath of sovereign defaults and financial crises in the 1990s, there have been calls for the widespread use by sovereigns of equity-like financial instruments, in particular, of GDP-indexed bonds. This paper calibrates a general equilibrium model with endogenous default to a typical emerging market economy and evaluates whether the existence of a (partially) GDP-indexed bond, as proposed in the literature, is quantitatively important in what concerns spreads, debt to GDP ratios, and the likelihood of default
|Date of creation:||03 Dec 2006|
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