The case for TIPS: an examination of the costs and benefits
AbstractSlightly more than a decade has passed since the introduction of the Treasury Inflation-Protected Securities (TIPS) program, through which the U.S. Treasury Department issues inflation-indexed debt. Several studies have suggested that the program has been a financial disappointment for the Treasury and by extension U.S. taxpayers. Relying on ex post analysis, the studies argue that a more cost-effective strategy remains the issuance of nominal Treasury securities. This article proposes that evaluations of the TIPS program be more comprehensive, and instead focus on the ex ante costs of TIPS issuance compared with nominal Treasury issuance. The authors contend that ex ante analysis is a more effective way to assess the costs of TIPS over the long run. Furthermore, relative cost calculations--whether ex post or ex ante--are just one aspect of a comprehensive analysis of the costs and benefits of the TIPS program. TIPS issuance provides other benefits that should be taken into account when evaluating the program, especially when TIPS are only marginally more expensive or about as expensive to issue as nominal Treasury securities.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of New York in its journal Economic Policy Review.
Volume (Year): (2009)
Issue (Month): Jul ()
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stefania D'Amico & Don H. Kim & Min Wei, 2010.
"Tips from TIPS: the informational content of Treasury Inflation-Protected Security prices,"
Finance and Economics Discussion Series
2010-19, Board of Governors of the Federal Reserve System (U.S.).
- Stefania D'Amico & Don H. Kim & Min Wei, 2008. "Tips from TIPS: the informational content of Treasury Inflation-Protected Security prices," Finance and Economics Discussion Series 2008-30, Board of Governors of the Federal Reserve System (U.S.).
- Stefania D'Amico & Don H Kim & Min Wei, 2008. "Tips from TIPS: the informational content of Treasury Inflation-Protected Security prices," BIS Working Papers 248, Bank for International Settlements.
- Michael J. Fleming & Neel Krishnan, 2012.
"The microstructure of the TIPS market,"
Economic Policy Review,
Federal Reserve Bank of New York, issue Mar, pages 27-45.
- Thomas Laubach, 2003.
"New evidence on the interest rate effects of budget deficits and debt,"
Finance and Economics Discussion Series
2003-12, Board of Governors of the Federal Reserve System (U.S.).
- Thomas Laubach, 2009. "New Evidence on the Interest Rate Effects of Budget Deficits and Debt," Journal of the European Economic Association, MIT Press, vol. 7(4), pages 858-885, 06.
- Frederic S. Mishkin, 2007.
NBER Working Papers
13147, National Bureau of Economic Research, Inc.
- Michael Fleming & Bruce Mizrach, 2008.
"The Microstructure of a U.S. Treasury ECN: The Brokertec Platform,"
Departmental Working Papers
200803, Rutgers University, Department of Economics.
- Michael J. Fleming & Bruce Mizrach, 2009. "The microstructure of a U.S. Treasury ECN: the BrokerTec platform," Staff Reports 381, Federal Reserve Bank of New York.
- John Y. Campbell & Robert J. Shiller, 1996.
"A Scorecard for Indexed Government Debt,"
Cowles Foundation Discussion Papers
1125, Cowles Foundation for Research in Economics, Yale University.
- Michael J. Fleming, 2002.
"Are larger Treasury issues more liquid? Evidence from bill reopenings,"
145, Federal Reserve Bank of New York.
- Fleming, Michael J, 2002. "Are Larger Treasury Issues More Liquid? Evidence from Bill Reopenings," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(3), pages 707-35, August.
- Michael J. Fleming, 2002. "Are larger Treasury issues more liquid? Evidence from bill reopenings," Proceedings, Federal Reserve Bank of Cleveland, pages 707-739.
- Andrew Ang & Geert Bekaert & Min Wei, 2007.
"The Term Structure of Real Rates and Expected Inflation,"
NBER Working Papers
12930, National Bureau of Economic Research, Inc.
- Andrew Ang & Geert Bekaert, 2004. "The term structure of real rates and expected inflation," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
- Andrew Ang & Geert Bekaert & Min Wei, 2008. "The Term Structure of Real Rates and Expected Inflation," Journal of Finance, American Finance Association, vol. 63(2), pages 797-849, 04.
- Ang, Andrew & Bekaert, Geert, 2004. "The Term Structure of Real Rates and Expected Inflation," CEPR Discussion Papers 4518, C.E.P.R. Discussion Papers.
- Guido Sandleris & Mark J.L Wright, 2013. "GDP-Indexed Bonds: A Tool to Reduce Macroeconomic Risk?," Business School Working Papers 2013-02, Universidad Torcuato Di Tella.
- Jens Christensen & James Gillan, 2011. "Has the Treasury benefited from issuing TIPS?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue apr18.
- Cartea, Álvaro & Saúl, Jonatan & Toro, Juan, 2012. "Optimal portfolio choice in real terms: Measuring the benefits of TIPS," Journal of Empirical Finance, Elsevier, vol. 19(5), pages 721-740.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.