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Home > Financial Stability > Financial Stability Paper 39: Sovereign GDP-linked bonds - James Benford, Thomas Best and Mark Joy with contributions from other central banks
 

Financial Stability Paper 39: Sovereign GDP-linked bonds - James Benford, Thomas Best and Mark Joy with contributions from other central banks

21 September 2016

Sovereign GDP-linked bonds
James Benford, Thomas Best and Mark Joy, Bank of England, with contributions from Mark Kruger, Bank of Canada, and the Research Department, Central Bank of Argentina

While the idea of governments issuing financial instruments whose repayments are indexed to gross domestic product (GDP) is not new, the current global backdrop of high sovereign debt coupled with low interest rates and weak and uncertain nominal growth prospects suggests the case for doing so may be especially strong now. This paper discusses the pros and cons of GDP-linked bonds, looks at when it might be most beneficial to issue, how investors might benefit, and possible ways of addressing the first-mover problem. The aim of this paper is to stimulate debate rather than provide answers.

Bank of England Workshop on GDP Linked Bonds

On Monday 30 November 2015 the Bank of England hosted a workshop on GDP linked bonds.
 
The workshop brought together lawyers and financial market practitioners, policymakers from both the national and international official sectors, and leading legal and economics academics, to discuss why these instruments do not exist already, to explore whether there are collective action problems that are impeding market formation, and if so, how these may be overcome. A summary of discussion is included below.
 
 

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