GDP-Linked Bonds

A recent paper, “Making a reality of GDP-linked sovereign bonds,” contends that this is an opportune time to consider how to establish a broad market for such bonds. The paper, by staff of the Bank of England with contributions from the Banco Central de la República Argentina and the Bank of Canada, proposes four next steps: (1) build on existing work on a draft term sheet; (2) develop guidelines for when GDP-linked bonds are most beneficial to a sovereign issuer outside of a restructuring; (3) assemble principles for using GDP-linked debt in debt restructurings; and (4) improve understanding about pricing of GDP-linked bonds.

(Thanks to David Beers of the Bank of England for notification about the paper. I  express no personal position on the subject here.)

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About Kurt Schuler

Kurt Schuler, co-editor of The Bretton Woods Transcripts, is Senior Fellow of Financial History at the Center for Financial Stability and an economist in the Office of International Affairs at the United States Department of the Treasury.

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