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The case for TIPS: an examination of the costs and benefits

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  • Jennifer Roush
  • William Dudley
  • Michelle Steinberg Ezer
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    Abstract

    Several studies have shown that, ex-post, the issuance of Treasury Inflation-Protected Securities (TIPS) has cost U.S. taxpayers money. We propose that evaluations of the TIPS program be more comprehensive and focus on the ex-ante costs of TIPS issuance versus nominal Treasury issuance and, especially when these costs are negligible, the more difficult-to-measure benefits of the program. Our study finds that the ex-ante costs of TIPS issuance versus nominal Treasury issuance are currently about equal and that TIPS provide meaningful benefits to investors and policymakers.

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    File URL: http://www.newyorkfed.org/research/staff_reports/sr353.html
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    File URL: http://www.newyorkfed.org/research/staff_reports/sr353.pdf
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 353.

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    Date of creation: 2008
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    Handle: RePEc:fip:fednsr:353

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    Related research

    Keywords: Treasury bonds ; Government securities ; Inflation risk ; Liquidity (Economics);

    This paper has been announced in the following NEP Reports:

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    Cited by:
    1. John Y. Campbell & Robert J. Shiller & Luis M. Viceira, 2009. "Understanding Inflation-Indexed Bond Markets," Cowles Foundation Discussion Papers 1696, Cowles Foundation for Research in Economics, Yale University.
    2. Jochmann, Markus & Koop, Gary & Potter, Simon M., 2010. "Modeling the dynamics of inflation compensation," Journal of Empirical Finance, Elsevier, vol. 17(1), pages 157-167, January.
    3. Michelle L. Barnes & Zvi Bodie & Robert K. Triest & J. Christina Wang, 2009. "TIPS scorecard: are TIPS accomplishing what they were supposed to accomplish?: can they be improved?," Public Policy Discussion Paper 09-8, Federal Reserve Bank of Boston.

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