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Indexed Units of Account: Theory and Assessment of Historical Experience

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  • Robert J. Shiller

Abstract

An indexed unit of account is a money analogue, used to express prices; the unit's" purchasing power is defined by an index. Indexed units of account are not true money in that" they are not used as a medium of exchange. The first successful indexed unit of account Unidad de Fomento (UF) has been used in Chile since 1967, and has been copied in Colombia Ecuador, Mexico, and Uruguay. The reasons for creating such units are discussed from the" standpoint of monetary theory. The experience with such units in Chile is discussed. It is argued" that important practical problems in implementing indexation were solved by creating such" indexed units of account. The existing indexed units of accounts may not be ideal for all" purposes, however, and alternative definitions of the units, relating the units to measures of" income, may also be advantageous. The indexed units of account might someday be" monetized,' i.e., institutions such as debit cards may be devised to allow the units to be used for" all transactions, so that the role of conventional money might be reduced to clearing-house" functions only.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6356.

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Date of creation: Jan 1998
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Handle: RePEc:nbr:nberwo:6356

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References

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  1. David Card & Dean Hyslop, 1995. "Does Inflation 'Grease the Wheels of the Labor Market'?," Working Papers 735, Princeton University, Department of Economics, Industrial Relations Section..
  2. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
  3. Michael D. Bordo & Anna J. Schwartz, 1989. "The ECU - An Imaginary or Embryonic Form of Money: What Can We Learn from History?," NBER Working Papers 2345, National Bureau of Economic Research, Inc.
  4. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
  5. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  6. John Y. Campbell & Robert J. Shiller, 1996. "A Scorecard for Indexed Government Debt," NBER Working Papers 5587, National Bureau of Economic Research, Inc.
  7. John Y. Campbell & Robert J. Shiller, 1996. "A Scorecard for Indexed Government Data," Harvard Institute of Economic Research Working Papers 1758, Harvard - Institute of Economic Research.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Ghost Money: Chile's Unidad de Fomento
    by JP Koning in Moneyness on 2013-09-23 14:57:00
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Cited by:
  1. Ould Ahmed, Pepita & Marques-Pereira, Jaime & Le Maux, Laurent & Desmedt, Ludovic & Blanc, Jerome & Théret, Bruno, 2013. "Monetary plurality in economic theory," Economics Papers from University Paris Dauphine 123456789/11496, Paris Dauphine University.
  2. Halabi, Claudia E. & Lastrapes, William D., 2003. "Estimating the liquidity effect in post-reform Chile: do inflationary expectations matter?," Journal of International Money and Finance, Elsevier, vol. 22(6), pages 813-833, November.
  3. Gomez Betancourt, Rebeca & de Boyer des Roches, Jérôme, 2012. "Origins and Develoment of Irving Fisher’s Compensated Dollar Plan," Economics Papers from University Paris Dauphine 123456789/10190, Paris Dauphine University.
  4. Hovanov, Nikolai V. & Kolari, James W. & Sokolov, Mikhail V., 2004. "Computing currency invariant indices with an application to minimum variance currency baskets," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1481-1504, June.
  5. Robert J. Shiller, 1999. "Designing Indexed Units of Account," NBER Working Papers 7160, National Bureau of Economic Research, Inc.
  6. Isil Erol & Kanak Patel, 2004. "Housing Policy and Mortgage Finance in Turkey During the Late 1990s Inflationary Period," International Real Estate Review, Asian Real Estate Society, vol. 7(1), pages 98-120.

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