In recent years, some countries have issued sovereign bonds indexed to real variables such as GDP. Moreover, there has been discussions about this issue during the European crisis. This paper analyzes the effects of introducing this type of contracts in a standard DSGE model with sovereign...

A number of countries have issued sovereign debt instruments indexed to real variables in recent years. This type of contracts could improve risk sharing between debtor countries and international creditors and diminish the probability of occurrence of debt crises. This paper characterizes the...

A small number of countries have issued real indexed sovereign debt in recent year. This type of contracts could improve risk sharing between debtor countries and international creditors and diminish the probability of occurrence of debt crises. However, it is not clear the magnitude of these...

the state of the economy, they also feature thresholds of the chosen real variable that trigger payments. We argue that the latter are typically suboptimal.