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State-Contingent Government Debt: a New Database

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  2. Economics, Finance, Business & Management
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  4. Vol. 55, Issue 1
  5. pp. 35–66

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Pina, G. State-Contingent Government Debt: a New Database. Credit and Capital Markets – Kredit und Kapital, 55(1), 35-66. https://doi.org/10.3790/ccm.55.1.35
Pina, Gonçalo "State-Contingent Government Debt: a New Database" Credit and Capital Markets – Kredit und Kapital 55.1, 2022, 35-66. https://doi.org/10.3790/ccm.55.1.35
Pina, Gonçalo (2022): State-Contingent Government Debt: a New Database, in: Credit and Capital Markets – Kredit und Kapital, vol. 55, iss. 1, 35-66, [online] https://doi.org/10.3790/ccm.55.1.35
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State-Contingent Government Debt: a New Database

Pina, Gonçalo

Credit and Capital Markets – Kredit und Kapital, Vol. 55 (2022), Iss. 1 : pp. 35–66

3 Citations (CrossRef)

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Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.55.1.35
Language
English
Pages
32
Keywords

Author Details

Prof. Dr. Gonçalo Pina, ESCP Business School, Chair of International Economics, Heubnerweg 8–10, 14059 Berlin.

Cited By

  1. Optimal GDP-indexed bonds

    Önder, Yasin Kürşat

    Review of Economic Dynamics, Vol. 51 (2023), Iss. P.747

    https://doi.org/10.1016/j.red.2023.08.002 [Citations: 2]

  2. State-contingent debt with lender risk aversion

    Pina, Gonçalo

    The Quarterly Review of Economics and Finance, Vol. 94 (2024), Iss. P.180

    https://doi.org/10.1016/j.qref.2024.01.009 [Citations: 0]

  3. Uncertainty Premia, Sovereign Default Risk, and State-Contingent Debt

    Roch, Francisco | Roldán, Francisco

    Journal of Political Economy Macroeconomics, Vol. 1 (2023), Iss. 2 P.334

    https://doi.org/10.1086/723950 [Citations: 3]

References

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  33. Barr, D./Bush, O./Pienkowski, A. (2014): GDP-linked bonds and sovereign default. In Life After Debt (pp. 246–275), Palgrave Macmillan, London.  Google Scholar
  34. Benford, J./Joy, M./Kruger, M./Best, T. (2016): Sovereign GDP-linked bonds, Bank of England Financial Stability Paper, 39.  Google Scholar
  35. Benford, J./Ostry, J. D./ Shiller, R. J. (eds.) (2018): Sovereign GDP-linked bonds: Rationale and Design. CEPR Press.  Google Scholar
  36. Bertinatto, L./Gomtsyan, D./Sandleris, G./Sapriza, H./Taddei, F. (2017): “Indexed Sovereign Debt: An Applied Framework”, Working Paper.  Google Scholar
  37. Blanchard, O./Mauro, P./Acalin, J. (2016): The case for growth-indexed bonds in advanced economies today, Peterson Institute for International Economics, Policy Brief, 16-2.  Google Scholar
  38. Borensztein, E./Mauro, P. (2004): The case for GDP‐indexed bonds, Economic Policy, 19(38).  Google Scholar
  39. Besley, T./Powell, A. P./Mundial, B. (1989): Commodity-indexed debt in international lending, International Economics Department, World Bank, 161.  Google Scholar
  40. Cabrillac, B./Gauvin, L./Gossé, J. L. (2016): GDP-indexed bonds: what are the benefits for issuing countries, investors and international financial stability?, Quarterly selection of articles-Bulletin de la Banque de France, 44.  Google Scholar
  41. Cecchetti, S./Schoenholtz, K. (2017): http://voxeu.org/article/gdp-linked-bonds-primer.  Google Scholar
  42. Chamon, M./Mauro, P. (2006): Pricing growth-indexed bonds, Journal of Banking & Finance, 30(12).  Google Scholar
  43. Cline, W. R. (1995): International debt reexamined, Peterson Institute Press: All Books.  Google Scholar
  44. Consiglio, A./Zenios, S. A. (2018): Pricing and hedging GDP-linked bonds in incomplete markets, Journal of Economic Dynamics and Control, 88.  Google Scholar
  45. Costa, A./Chamon, M./Ricci, L. A. (2008): Is there a novelty premium on new financial instruments? The Argentine experience with GDP-indexed warrants, IMF Working Papers, 109.  Google Scholar
  46. Council of Economic Advisors. (2004): “Growth indexed bonds, a primer”.  Google Scholar
  47. Deacon, M./Derry, A./Mirfendereski, D. (2004): Inflation-indexed securities: bonds, swaps and other derivatives, John Wiley & Sons.  Google Scholar
  48. Dunaway, S./Rennhack, R./Aitken, B./Anayiotos, G./Andrews, D./Aziz, J./Laursen, T. (1995): Private market financing for developing countries, IMF.  Google Scholar
  49. Haldane, A. (1999): Private sector involvement in financial crisis: analytics and public policy approaches, Financial Stability Review, 9.  Google Scholar
  50. IMF (2017): State-Contingent Debt Instruments for Sovereigns, IMF Policy Paper, May 22.  Google Scholar
  51. IMF and World Bank (2011): Managing Volatility in Low-Income Countries: The Role and Potential for Contingent Financial Instruments.  Google Scholar
  52. Le Monde (1956), “L’emprunt d’équipement, levier de l’expansion”, June 20th 1956, https://www.lemonde.fr/archives/article/1956/06/20/l-emprunt-d-equipement-levier-de-l-expansion_2258121_1819218.html.  Google Scholar
  53. Obstfeld, M./Peri, G. (1998): Regional Non-Adjustment and Fiscal Policy: Lessons for EMU, Economic Policy, 13(26).  Google Scholar
  54. Park, S. K./Samples, T. R. (2015): Towards Sovereign Equity, Stan. JL Bus. & Fin., 21, 240.  Google Scholar
  55. Pouzo, D./Presno, I. (2016): Sovereign default risk and uncertainty premia. American Economic Journal: Macroeconomics, 8(3).  Google Scholar
  56. Rozental, A.A. (1959): Variable-Return Bonds – The French Experience, The Journal of Finance, 14(4).  Google Scholar
  57. Sandleris, G./Wright, M. L. (2013): GDP-Indexed bonds: a tool to reduce macroeconomic risk?, The future of sovereign borrowing in Europe.  Google Scholar
  58. Schinckus, C. (2013): How to value GDP-linked collar bonds? An introductory perspective, Theoretical Economics Letters, 3.03: 152.  Google Scholar
  59. Shiller, R. (1993): Macro markets: creating institutions for managing society’s largest economic risks, Oxford University Press.  Google Scholar
  60. Tomz, M./Wright, M. L. (2013): Empirical research on sovereign debt and default, Annu. Rev. Econ., 5(1).  Google Scholar
  61. Weidenmier, M. D. (2000): The market for confederate cotton bonds, Explorations in Economic History, 37(1).  Google Scholar
  62. Williamson, J. (2017): Growth-Linked Securities, Springer.  Google Scholar
  63. Atta-Mensah, J. (2004): Commodity-linked bonds: a potential means for less-developed countries to raise foreign capital, Bank of Canada, 20.  Google Scholar
  64. Barr, D./Bush, O./Pienkowski, A. (2014): GDP-linked bonds and sovereign default. In Life After Debt (pp. 246–275), Palgrave Macmillan, London.  Google Scholar
  65. Benford, J./Joy, M./Kruger, M./Best, T. (2016): Sovereign GDP-linked bonds, Bank of England Financial Stability Paper, 39.  Google Scholar
  66. Benford, J./Ostry, J. D./ Shiller, R. J. (eds.) (2018): Sovereign GDP-linked bonds: Rationale and Design. CEPR Press.  Google Scholar
  67. Bertinatto, L./Gomtsyan, D./Sandleris, G./Sapriza, H./Taddei, F. (2017): “Indexed Sovereign Debt: An Applied Framework”, Working Paper.  Google Scholar
  68. Blanchard, O./Mauro, P./Acalin, J. (2016): The case for growth-indexed bonds in advanced economies today, Peterson Institute for International Economics, Policy Brief, 16-2.  Google Scholar
  69. Borensztein, E./Mauro, P. (2004): The case for GDP‐indexed bonds, Economic Policy, 19(38).  Google Scholar
  70. Besley, T./Powell, A. P./Mundial, B. (1989): Commodity-indexed debt in international lending, International Economics Department, World Bank, 161.  Google Scholar
  71. Cabrillac, B./Gauvin, L./Gossé, J. L. (2016): GDP-indexed bonds: what are the benefits for issuing countries, investors and international financial stability?, Quarterly selection of articles-Bulletin de la Banque de France, 44.  Google Scholar
  72. Cecchetti, S./Schoenholtz, K. (2017): http://voxeu.org/article/gdp-linked-bonds-primer.  Google Scholar
  73. Chamon, M./Mauro, P. (2006): Pricing growth-indexed bonds, Journal of Banking & Finance, 30(12).  Google Scholar
  74. Cline, W. R. (1995): International debt reexamined, Peterson Institute Press: All Books.  Google Scholar
  75. Consiglio, A./Zenios, S. A. (2018): Pricing and hedging GDP-linked bonds in incomplete markets, Journal of Economic Dynamics and Control, 88.  Google Scholar
  76. Costa, A./Chamon, M./Ricci, L. A. (2008): Is there a novelty premium on new financial instruments? The Argentine experience with GDP-indexed warrants, IMF Working Papers, 109.  Google Scholar
  77. Council of Economic Advisors. (2004): “Growth indexed bonds, a primer”.  Google Scholar
  78. Deacon, M./Derry, A./Mirfendereski, D. (2004): Inflation-indexed securities: bonds, swaps and other derivatives, John Wiley & Sons.  Google Scholar
  79. Dunaway, S./Rennhack, R./Aitken, B./Anayiotos, G./Andrews, D./Aziz, J./Laursen, T. (1995): Private market financing for developing countries, IMF.  Google Scholar
  80. Haldane, A. (1999): Private sector involvement in financial crisis: analytics and public policy approaches, Financial Stability Review, 9.  Google Scholar
  81. IMF (2017): State-Contingent Debt Instruments for Sovereigns, IMF Policy Paper, May 22.  Google Scholar
  82. IMF and World Bank (2011): Managing Volatility in Low-Income Countries: The Role and Potential for Contingent Financial Instruments.  Google Scholar
  83. Le Monde (1956), “L’emprunt d’équipement, levier de l’expansion”, June 20th 1956, https://www.lemonde.fr/archives/article/1956/06/20/l-emprunt-d-equipement-levier-de-l-expansion_2258121_1819218.html.  Google Scholar
  84. Obstfeld, M./Peri, G. (1998): Regional Non-Adjustment and Fiscal Policy: Lessons for EMU, Economic Policy, 13(26).  Google Scholar
  85. Park, S. K./Samples, T. R. (2015): Towards Sovereign Equity, Stan. JL Bus. & Fin., 21, 240.  Google Scholar
  86. Pouzo, D./Presno, I. (2016): Sovereign default risk and uncertainty premia. American Economic Journal: Macroeconomics, 8(3).  Google Scholar
  87. Rozental, A.A. (1959): Variable-Return Bonds – The French Experience, The Journal of Finance, 14(4).  Google Scholar
  88. Sandleris, G./Wright, M. L. (2013): GDP-Indexed bonds: a tool to reduce macroeconomic risk?, The future of sovereign borrowing in Europe.  Google Scholar
  89. Schinckus, C. (2013): How to value GDP-linked collar bonds? An introductory perspective, Theoretical Economics Letters, 3.03: 152.  Google Scholar
  90. Shiller, R. (1993): Macro markets: creating institutions for managing society’s largest economic risks, Oxford University Press.  Google Scholar
  91. Tomz, M./Wright, M. L. (2013): Empirical research on sovereign debt and default, Annu. Rev. Econ., 5(1).  Google Scholar
  92. Weidenmier, M. D. (2000): The market for confederate cotton bonds, Explorations in Economic History, 37(1).  Google Scholar
  93. Williamson, J. (2017): Growth-Linked Securities, Springer.  Google Scholar

Abstract

State-contingent government debt has been proposed as a way to reduce costly debt crisis. However, markets for this type of debt remain very limited, for reasons that are not yet fully understood. This paper describes a new database covering state-contingent government debt issued between 1863 and 2020. Based on these data, this paper shows stylized facts regarding the main design features, and market performance, of state-contingent government debt. It also provides a brief history of state-contingent government borrowing, which is contextualized with a simple theoretical model of state-contingent debt. The results show that there have been several small, heterogeneous, issuances of state-contingent debt, which resemble pilot runs in this new asset class. The paper concludes with some common challenges associated to state-contingent government debt.

Table of Contents

Section Title Page Action Price
Gonçalo Pina: State-Contingent Government Debt: a New Database 35
Abstract 35
I. Introduction 35
II. Theoretical Framework 37
1. Government Budget Constraint 37
2. Stabilizing Role of State-Contingent Debt 38
3. Market for State-Contingent Debt 41
III. Database 43
1. Basic Features 35
2. Design 35
3. Performance 35
IV. Overview of Experiences with State-Contingent Debt 36
1. Early State-Contingent Government Debt 36
2. The Brady Plan 36
3. The Singapore Experiments 36
4. Argentina, Greece and Ukraine’s GDP-Linked Warrants 36
5. Portuguese Experience with GDP-Linked Treasury Certificates 36
6. Catastrophe Bonds 36
V. Discussion 36
VI. Conclusion 37
References 37

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