Debt Limits and the Structure of Public Debt

Debt Limits and the Structure of Public Debt AbstractThis paper provides a tractable framework to assess how the structure of debt instruments – specifically by currency denomination and indexation to GDP – can raise the debt limit of a sovereign. By calibrating the model to different country fundamentals, it is clear that there is no 'one-size-fits-all' approach to optimal instrument design. For instance, low income countries may find benefit in issuing local currency debt; while in advanced economies, debt tolerance can be substantially enhanced through issuing GDP-linked bonds. By looking at the marginal impact of these instruments, the paper also provides insight into the optimal portfolio composition. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Globalization and Development de Gruyter

Debt Limits and the Structure of Public Debt

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Publisher
de Gruyter
Copyright
©2017 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1948-1837
eISSN
1948-1837
D.O.I.
10.1515/jgd-2017-0018
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper provides a tractable framework to assess how the structure of debt instruments – specifically by currency denomination and indexation to GDP – can raise the debt limit of a sovereign. By calibrating the model to different country fundamentals, it is clear that there is no 'one-size-fits-all' approach to optimal instrument design. For instance, low income countries may find benefit in issuing local currency debt; while in advanced economies, debt tolerance can be substantially enhanced through issuing GDP-linked bonds. By looking at the marginal impact of these instruments, the paper also provides insight into the optimal portfolio composition.

Journal

Journal of Globalization and Developmentde Gruyter

Published: May 31, 2018

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