Issuing GDP-linked bonds: Supply and demand can match
This paper compares supply and demand to assess to what extent there can be a market for GDP-linked bonds (GLBs). For the government side, simulations illustrate the debt-stabilisation property of GLBs. These simulations consider shock persistence with a VAR structure and large events with shocks dr...
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| Format: | Elektronisch E-Book |
| Sprache: | English |
| Veröffentlicht: |
Paris
OECD Publishing
2018
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| Schriftenreihe: | OECD Economics Department Working Papers
no.1500 |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | This paper compares supply and demand to assess to what extent there can be a market for GDP-linked bonds (GLBs). For the government side, simulations illustrate the debt-stabilisation property of GLBs. These simulations consider shock persistence with a VAR structure and large events with shocks drawn from the residuals. Countries where shock persistence and the standard deviation of the interest rate - growth rate differential scaled with the debt level are higher reap more benefits from GLBs and hence can accept a larger risk premium on GLBs. For the investors' side, risk premia compensating for GDP volatility are calculated with a CAPM, considering not only the size of growth shocks and their correlation with market prices, but also their persistence. Calculations are made with simplifying assumptions going against the case of GLBs: in particular, the possible reduction in the default risk premium is ignored. Even so, both high-risk and low-risk countries can benefit from GLBs: the ones that have to pay a larger risk premium are those that need this insurance against debt crises the most. |
| Beschreibung: | 1 Online-Ressource (31 p.) |
| DOI: | 10.1787/1da2253f-en |
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| spelling | Fournier, Jean-Marc VerfasserIn aut Issuing GDP-linked bonds Supply and demand can match Jean-Marc, Fournier and Jakob, Lehr Paris OECD Publishing 2018 1 Online-Ressource (31 p.) Text txt rdacontent Computermedien c rdamedia Online-Ressource cr rdacarrier OECD Economics Department Working Papers no.1500 This paper compares supply and demand to assess to what extent there can be a market for GDP-linked bonds (GLBs). For the government side, simulations illustrate the debt-stabilisation property of GLBs. These simulations consider shock persistence with a VAR structure and large events with shocks drawn from the residuals. Countries where shock persistence and the standard deviation of the interest rate - growth rate differential scaled with the debt level are higher reap more benefits from GLBs and hence can accept a larger risk premium on GLBs. For the investors' side, risk premia compensating for GDP volatility are calculated with a CAPM, considering not only the size of growth shocks and their correlation with market prices, but also their persistence. Calculations are made with simplifying assumptions going against the case of GLBs: in particular, the possible reduction in the default risk premium is ignored. Even so, both high-risk and low-risk countries can benefit from GLBs: the ones that have to pay a larger risk premium are those that need this insurance against debt crises the most. Education Lehr, Jakob MitwirkendeR ctb FWS01 ZDB-13-SOC FWS_PDA_SOC https://doi.org/10.1787/1da2253f-en Volltext |
| spellingShingle | Fournier, Jean-Marc Issuing GDP-linked bonds Supply and demand can match Education |
| title | Issuing GDP-linked bonds Supply and demand can match |
| title_auth | Issuing GDP-linked bonds Supply and demand can match |
| title_exact_search | Issuing GDP-linked bonds Supply and demand can match |
| title_full | Issuing GDP-linked bonds Supply and demand can match Jean-Marc, Fournier and Jakob, Lehr |
| title_fullStr | Issuing GDP-linked bonds Supply and demand can match Jean-Marc, Fournier and Jakob, Lehr |
| title_full_unstemmed | Issuing GDP-linked bonds Supply and demand can match Jean-Marc, Fournier and Jakob, Lehr |
| title_short | Issuing GDP-linked bonds |
| title_sort | issuing gdp linked bonds supply and demand can match |
| title_sub | Supply and demand can match |
| topic | Education |
| topic_facet | Education |
| url | https://doi.org/10.1787/1da2253f-en |
| work_keys_str_mv | AT fournierjeanmarc issuinggdplinkedbondssupplyanddemandcanmatch AT lehrjakob issuinggdplinkedbondssupplyanddemandcanmatch |