Within the last five years, Canada, Sweden and New Zealand have joined the ranks of the United Kingdom and other countries in issuing government bonds that are indexed to inflation. Some observers of the experience in these countries have argued that the United States should follow suit. This paper provides an overview of the issues surrounding debt indexation, and it tries to answer three empirical questions about indexed debt. First, how different would the returns on indexed bonds be from the returns on existing US debt instruments? Second, how would indexed bonds affect the government's average financing costs? Third, how might the Federal Reserve be able to use the information contained in the prices of indexed bonds to help formulate monetary policy? The paper concludes with a more speculative discussion of the possible consequences of increased use of indexed debt contracts by the private sector.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5587.
Length: Date of creation: May 1996 Date of revision: Publication status: published relationship to a non-chapter. This should not happen. Please contact NBER. Handle: RePEc:nbr:nberwo:5587
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John Y. Campbell & Robert J. Shiller, 1996.
"A Scorecard for Indexed Government Debt,"
NBER Chapters,
in: NBER Macroeconomics Annual 1996, Volume 11, pages 155-208
National Bureau of Economic Research, Inc.
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Find related papers by JEL classification: G12 - Financial Economics - - General Financial Markets - - - Asset Pricing E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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