The case for NGDP-linked government bonds

The case for NGDP-linked government bonds
Market Monetarists have long argued that governments should issue bond linked to the development in nominal GDP. The main argument has been that NGDP-linked bond would be a very good indication of monetary policy conditions. However, in this post I will try to lay out the argument for NGDP-linked bonds - not from a monetary policy perspective, but from a fiscal perspective. What is an NGDP-linked bond? A NGDP-linked bond is simply a bond where the price of the bond is linked to the level of NGDP or the growth rate of NGDP on a given time-horizon. Hence, this is exactly similar to an inflation-linked bond, but with a difference that the price is linked to NGDP so when NGDP expectations increase the price of the bond would go up. X reasons why NGDP-bonds would be a great idea NGDP- Protection against monetary policy failure Real-time growth forecast


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