01975cas a2200253 a 4500 AALejournalIMF002117 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451970173 1934-7456 BD-DhAAL BD-DhAAL Borensztein, Eduardo. Reviving the Case for GDP-Indexed Bonds / Eduardo Borensztein, Paolo Mauro. Washington, D.C. : International Monetary Fund, 2002. 1 online resource (25 pages) IMF Policy Discussion Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper seeks to revive the case for countries to self-insure against economic growth slowdowns by issuing GDP-indexed bonds. We simulate the effects of GDP-indexed bonds under different assumptions about fiscal policy reaction functions and their output effects and find that they could substantially reduce the likelihood that debt/GDP paths become explosive. The insurance premium would likely be small, because cross-country comovement of GDP growth rates is low and cross-country GDP growth risk is thus largely diversifiable for an investor holding a portfolio of GDP-indexed bonds. Potential obstacles to the emergence of a market for these bonds include the verifiability of GDP data, the trade-off between insurance and moral hazard, and the need for liquidity. The paper discusses institutional fixes and suggests an approach to attempting to start up a market. Mode of access: Internet Mauro, Paolo. IMF Policy Discussion Papers; Policy Discussion Paper ; No. 2002/010 Full text available on IMF http://elibrary.imf.org/view/journals/003/2002/010/003.2002.issue-010-en.xml IMF e-Library