Speaking notes presented at the European Commission DG ECFIN – OECD Economics Department workshop on GDP-linked government bonds on 17 January 2018 in Brussels, Belgium.

The debt crisis in the eurozone earlier in the decade has reignited a discussion about the design of financial instruments that could help to avoid economically and socially costly sovereign defaults. One instrument that has attracted particular attention is sovereign GDP-linked bonds (GLBs). At least one eurozone sovereign--Portugal--has issued small amounts of non-tradable GLBs for the retail market. What most GLB proposals have in common is debt-service relief in times of economic downturns, while economic booms would coincide with higher debt service payments. In most proposals, GDP is measured in nominal terms.[...]