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The Invention of Inflation-Indexed Bonds in Early America

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  • Robert J. Shiller

Abstract

The world's first known inflation-indexed bonds were issued by the Commonwealth of Massachusetts in 1780 during the Revolutionary War. These bonds were invented to deal with severe wartime inflation and with angry discontent among soldiers in the U.S. Army with the decline in purchasing power of their pay. Although the bonds were successful, the concept of indexed bonds was abandoned after the immediate extreme inflationary environment passed, and largely forgotten until the twentieth century. In 1780, the bonds were viewed as at best only an irregular expedient, since there was no formulated economic theory to justify indexation.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10183.

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Date of creation: Dec 2003
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Publication status: published as Goetzmann, William N. and Geert K. Rouwenhorst (eds.) The Origins of Value: The Financial Innovations that Created Modern Capital Markets. Oxford: Oxford University Press, 2005.
Handle: RePEc:nbr:nberwo:10183

Note: DAE EFG ME
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  1. John Y. Campbell & Robert J. Shiller, 1996. "A Scorecard for Indexed Government Debt," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1996, Volume 11, pages 155-208 National Bureau of Economic Research, Inc.
  2. Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 971, Cowles Foundation for Research in Economics, Yale University.
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Cited by:
  1. Guido Sandleris & Mark L.J. Wright, 2013. "GDP-Indexed Bonds: A Tool to Reduce Macroeconomic Risk?," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  2. Morten Balling & Ernest Gnan & Johannes Holler & Ulrich Bindseil & Nicolas Sauter & Hans J. Blommestein & Maria Cannata & Juha Kilponen & Alessandro Missale & Ewald Nowotny & Guido Sandleris & Mark L., 2013. "The Future of Sovereign Borrowing in Europe," SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum, number 2013/5 edited by Morten Balling & Ernest Gnan & Johannes Holler, July.
  3. Laura Alfaro & Fabio Kanczuk, 2006. "Deuda soberana: indexación y vencimiento," Research Department Publications, Inter-American Development Bank, Research Department 4460, Inter-American Development Bank, Research Department.
  4. Juan Angel Garcia & Adrian van Rixtel, 2007. "Inflation-linked bonds from a Central Bank perspective," Occasional Paper Series, European Central Bank 62, European Central Bank.
  5. Chen, Ren-Raw & Liu, Bo & Cheng, Xiaolin, 2010. "Pricing the term structure of inflation risk premia: Theory and evidence from TIPS," Journal of Empirical Finance, Elsevier, Elsevier, vol. 17(4), pages 702-721, September.
  6. Morten Balling & Ernest Gnan & Johannes Holler, 2013. "Introduction and Key Findings," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  7. Hans J. Blommestein, 2013. "Forces Shaping the OECD Sovereign Borrowing Outlook with Emphasis on the Challenges for European Sovereign Issuers," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  8. Maria Cannata, 2013. "Risk Management of a Public Debt Portfolio: The Italian Experience," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  9. Cohen, Joseph N & Linton, April, 2010. "The historical relationship between inflation and political rebellion, and what it might teach us about neoliberalism," MPRA Paper, University Library of Munich, Germany 22522, University Library of Munich, Germany.
  10. Laura Alfaro & Fabio Kanczuk, 2006. "Sovereign Debt: Indexation and Maturity," IDB Publications, Inter-American Development Bank 6709, Inter-American Development Bank.
  11. Ben Kyer & Gary Maggs, 2009. "On Indexed Bonds and Aggregate Demand Elasticity," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 37(1), pages 17-21, March.
  12. Ewald Nowotny, 2013. "Opening Address SUERF/OeNB/BWG Conference on ‘The Future of Sovereign Borrowing in Europe’," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  13. Ulrich Bindseil, 2013. "The Role of Sovereign Debt in Monetary Policy Implementation – An International Comparative Perspective," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  14. Juha Kilponen, 2013. "European Debt Crisis and Crisis Resolution Policies," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  15. repec:udt:wpbsdt:nombre_del_archivo is not listed on IDEAS

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