Growth-Linked Securities (eBook)

John Williamson was a senior fellow at the Peterson Institute for International Economics, US, from 1981 to 2012. He was project director for the UN High-Level Panel on Financing for Development (the Zedillo Report) in 2001 and on leave as chief economist for South Asia at the World Bank during 1996–99. He has taught as an economics professor at several universities, including Pontifḯcia Universidade Católica do Rio de Janeiro, University of Warwick, Massachusetts Institute of Technology, University of York, and Princeton University. John was also adviser to the International Monetary Fund (1972–74); and economic consultant to the UK Treasury (1968–70).

Preface to Professor John Williamson’s Book GDP-Linked Securities 5
Contents 10
List of Tables 12
Chapter 1: Introduction 13
Reference 16
Chapter 2: History and Precedents 17
2.1 Intellectual History of the Idea 20
2.2 History of the Use of GDP-Linked Securities 22
References 27
Chapter 3: The Variants of GDP-Linked Securities 29
3.1 The Variants 30
3.2 Differences Between the Variants 32
3.3 An Account of the Bank of England Conference 33
3.4 Critique of the Workshop 55
3.5 Other Design Features 57
3.5.1 Denomination 57
3.5.2 Pari Passu Clauses 57
3.5.3 Debt Reconstruction 58
3.5.4 CACs 58
3.5.5 Governing Law 58
References 59
Chapter 4: The Benefits of GDP-Linked Securities 60
4.1 Advantages to Potential Borrowers 61
4.1.1 Shift of Risk to Lenders 61
4.1.2 Reduction in Danger of Default 62
4.1.3 Anti-cyclical Impact 65
4.1.4 Fiscal Space 66
4.1.5 For Members of a Monetary Union 66
4.1.6 Aid in Debt Reconstruction 67
4.2 Advantages to Potential Lenders 67
4.2.1 Creation of Instrument Linked to National Growth 68
4.2.2 Relationship to Sharia 68
4.2.3 Combination of Attributes 68
4.3 Concluding Comments 72
Annex 72
References 74
Chapter 5: The Costs of GDP-Linked Securities 75
5.1 Costs to Borrowers 76
5.2 Costs to the Lender 77
5.3 The Question of Moral Hazard 78
5.4 Concluding Comments 79
References 80
Chapter 6: Topics in the Demand for GDP-Linked Securities 81
References 86
Chapter 7: Topics in the Supply of GDP-Linked Securities 87
7.1 Sovereign Borrowing 88
7.2 The Advantages for Members of a Monetary Union 92
7.3 A Term Sheet for BM 93
7.4 Concluding Remarks 101
Reference 102
Chapter 8: GDP Revisions 103
8.1 Routine Adjustments 104
8.2 Manipulation 107
8.3 Structural Changes 108
8.4 Concluding Remarks 117
References 118
Chapter 9: Would BM Really Be Anti-cyclical? 119
References 122
Chapter 10: Selecting the Best Form 123
10.1 DS 124
10.2 BM Versus RS 124
10.3 Selection 126
Chapter 11: The Disadvantages of Financial Innovation 127
References 131
Chapter 12: Concluding Remarks 132
Reference 135
Index 136