## Pricing Growth-Indexed Bonds

_IMF Working Papers, November 1, 2005_

## Source details

**Canonical URL:** [Pricing Growth-Indexed Bonds](https://www.imf.org/en/publications/wp/issues/2016/12/31/pricing-growth-indexed-bonds-18667)

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## Bibliographic details
- Authors: Paolo Mauro, Marcos Chamon
- Published: November 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451862355.001

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### Summary
- Authors: Paolo Mauro, Marcos Chamon
- Date: November 1, 2005
- Core proposition: Growth-indexed bonds can reduce the procyclicality of emerging-market countries' fiscal policies and lower the likelihood of costly debt crises.
- Main barrier noted: Investor attitude surveys suggest that pricing difficulties are seen as a considerable obstacle.
- Objective of the paper: Present a simple way of pricing growth-indexed bonds and quantify the implications of increasing their share in total debt.

### Pricing approach (as described)
- The article presents a simple method for pricing growth-indexed bonds intended to reduce investor concerns about valuation difficulties.
- Terminology preserved: growth-indexed bond, plain-vanilla bond.

### Quantitative implications and findings
- Increasing the share of growth-indexed bonds in total debt is analyzed quantitatively to measure:
  - The ensuing decline in the probability of default.
  - The reduction in the spreads at which standard bonds can be issued.
- No numerical results for default probabilities or spread reductions are provided on this page; the page reports that the analysis tracks these quantitative implications.

### Policy relevance and implications
- Growth-indexed bonds are presented as a tool to:
  - Reduce fiscal procyclicality in emerging-market countries.
  - Decrease the likelihood of costly sovereign debt crises.
- Addressing investor concerns about pricing simplicity could facilitate issuance and adoption.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/pricing-growth-indexed-bonds-18667_