Debt Limits and the Structure of Public Debt

Author/Editor:

Alex Pienkowski

Publication Date:

May 22, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This 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 compostion.

Series:

Working Paper No. 17/117

English

Publication Date:

May 22, 2017

ISBN/ISSN:

9781484300657/1018-5941

Stock No:

WPIEA2017117

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

21

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