More RRBs, Please! Why Ottawa Should Issue More Inflation-Indexed Bonds
Financial instruments indexed to the general price level are of great potential use to borrowers and lenders alike. But up until recently, they have been relatively scarce – in part because private borrowers dislike offering protection against inflation that they do not control. Since the early 1980s, several developed-country governments have begun issuing price-level-linked bonds, and these bonds now constitute a large share of some countries’ total debt issue. This study argues that Canada’s federal government, which began issuing real-return bonds (RRBs) in 1991, should issue more RRBs of more types than it currently plans to do. Issuing more RRBs would not only better satisfy existing demand from investors, it has the potential to spur the development of other price-indexed instruments. Experience elsewhere suggests that more federal RRBs could encourage other entities to issue price-indexed debt, and would let intermediaries provide such products as inflation-linked annuities, thus providing more Canadian savers with protection against intentional or accidental inflation.
Volume (Year): (2012)
Issue (Month): 363 (September)
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- Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973, April.
- David Longworth, 2012. "Combatting the Dangers Lurking in the Shadows: The Macroprudential Regulation of Shadow Banking," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 361, September.
- Benjamin Dachis & William B.P. Robson, 2012. "From Living Well to Working Well: Raising Canada's Performance in Non-residential Investment," e-briefs 137, C.D. Howe Institute.
- Juan Angel Garcia & Adrian van Rixtel, 2007.
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- Juan Angel Garcia & Adrian van Rixtel, 2007. "Inflation-linked bonds from a Central Bank perspective," Occasional Paper Series 62, European Central Bank.
- Gregor W. Smith, 2009. "The Missing Links: Better Measures of Inflation and Inflation Expectations in Canada," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 287, April.
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