Publication

This brief explores how GDP-indexed bonds might help reduce the risk of sovereign debt defaults. While proponents of this option have argued that the large-scale issuance of such loss-absorbing liabilities may help stabilize debt-to-GDP ratios, skeptics suggest that such debt would be expensive to issue. In light of this unresolved debate, the brief’s author argues that an accurate assessment of these bonds’ worth would ultimately require some kind of a test-run.