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A Scorecard for Indexed Government Debt

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  • John Y. Campbell
  • Robert J. Shiller

Abstract

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.

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Date of creation: May 1996
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Publication status: published as A Scorecard for Indexed Government Debt , John Y. Campbell, Robert J. Shiller. in NBER Macroeconomics Annual 1996, Volume 11 , Bernanke and Rotemberg. 1996
Handle: RePEc:nbr:nberwo:5587

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  1. Missale, Alessandro & Blanchard, Olivier Jean, 1994. "The Debt Burden and Debt Maturity," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 309-19, March.
  2. Breeden, Douglas T & Gibbons, Michael R & Litzenberger, Robert H, 1989. " Empirical Tests of the Consumption-Oriented CAPM," Journal of Finance, American Finance Association, American Finance Association, vol. 44(2), pages 231-62, June.
  3. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
  4. Ammer, John & Campbell, John, 1993. "What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns," Scholarly Articles 3382857, Harvard University Department of Economics.
  5. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 47(2), pages 427-65, June.
  6. Mishkin, F.S., 1988. "What Does The Term Structure Tell Us About Future Inflation?," Papers fb-_88-29, Columbia - Graduate School of Business.
  7. David Card & Dean Hyslop, 1996. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Working Papers 5538, National Bureau of Economic Research, Inc.
  8. John Y. Campbell, 1995. "Some Lessons from the Yield Curve," Harvard Institute of Economic Research Working Papers 1713, Harvard - Institute of Economic Research.
  9. King, Mervyn, 1995. "Credibility and Monetary Policy: Theory and Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 42(1), pages 1-19, February.
  10. Campbell, John, 1996. "Understanding Risk and Return," Scholarly Articles 3153293, Harvard University Department of Economics.
  11. Frederic S. Mishkin, 1991. "The Information in the Longer Maturity Term Structure about Future Inflation," NBER Working Papers 3126, National Bureau of Economic Research, Inc.
  12. Darby, Michael R, 1975. "The Financial and Tax Effects of Monetary Policy on Interest Rates," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 13(2), pages 266-76, June.
  13. Bohn, Henning, 1988. "Why do we have nominal government debt?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(1), pages 127-140, January.
  14. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, Econometric Society, vol. 41(5), pages 867-87, September.
  15. S.A.B. Page & Sandra Trollope, 1974. "An International Survey of Indexing and Its Effects," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 70(1), pages 46-59, November.
  16. Campbell, John Y & Shiller, Robert J, 1991. "Yield Spreads and Interest Rate Movements: A Bird's Eye View," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(3), pages 495-514, May.
  17. Boudoukh, Jacob & Whitelaw, Robert F, 1993. "Liquidity as a Choice Variable: A Lesson from the Japanese Government Bond Market," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 6(2), pages 265-92.
  18. Fischer, Stanley & Summers, Lawrence H, 1989. "Should Governments Learn to Live with Inflation?," American Economic Review, American Economic Association, American Economic Association, vol. 79(2), pages 382-87, May.
  19. Robert J. Barro, 1995. "Optimal Debt Management," NBER Working Papers 5327, National Bureau of Economic Research, Inc.
  20. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  21. David G. Barr & John Y. Campbell, 1995. "Inflation, Real Interest Rates and the Bond Market: A Study of UK Nominal Index-Linked Government Bond Prices," Harvard Institute of Economic Research Working Papers 1731, Harvard - Institute of Economic Research.
  22. Fama, Eugene F & Bliss, Robert R, 1987. "The Information in Long-Maturity Forward Rates," American Economic Review, American Economic Association, American Economic Association, vol. 77(4), pages 680-92, September.
  23. Modigliani, Franco & Shiller, Robert J, 1973. "Inflation, Rational Expectations and the Term Structure of Interest Rates," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 40(157), pages 12-43, February.
  24. John Geanakoplos & Martin Shubik, 1989. "The Capital Asset Pricing Model as a General Equilibrium with Incomplete Markets," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 913, Cowles Foundation for Research in Economics, Yale University.
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  1. Financing the Federal Government with Inflation-Protected Securities
    by Carola Binder in Noahpinion on 2013-09-18 00:40:00
  2. Academic Scribblers and the History of Inflation-Protected Securities
    by noreply@blogger.com (Carola Binder) in Quantitative Ease on 2013-09-16 19:43:00
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