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State-Contingent Government Debt: a New Database

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  2. Economics, Finance, Business & Management
  3. Credit and Capital Markets – Kredit und Kapital
  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 | First published online: May 10, 2022

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
License
CC BY 4.0
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: 3]

  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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  27. Schinckus, C. (2013): How to value GDP-linked collar bonds? An introductory perspective, Theoretical Economics Letters, 3.03: 152.  Google Scholar
  28. Shiller, R. (1993): Macro markets: creating institutions for managing society’s largest economic risks, Oxford University Press.  Google Scholar
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  30. Weidenmier, M. D. (2000): The market for confederate cotton bonds, Explorations in Economic History, 37(1).  Google Scholar
  31. Williamson, J. (2017): Growth-Linked Securities, Springer.  Google Scholar
  32. Atta-Mensah, J. (2004): Commodity-linked bonds: a potential means for less-developed countries to raise foreign capital, Bank of Canada, 20.  Google Scholar
  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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