IDEAS home Printed from https://ideas.repec.org/a/spr/joecth/v10y1997i1p1-37.html
   My bibliography  Save this article

Which improves welfare more: A nominal or an indexed bond?

Author

Listed:
  • Michael Magill

    (Department of Economics, University of Southern California, Los Angeles, CA 90089-0253, USA)

  • Martine Quinzii

    (Department of Economics, University of California, Davis, CA 95616-8578, USA)

Abstract

Economists have long argued that loan contracts should be indexed to remove the risks arising from fluctuations in the purchasing power of money: indexation however while eliminating one risk, substitutes another, arising from fluctuations in relative prices of goods. We present a theoretical framework which permits the relative merits of a nominal versus an indexed bond to be assessed in a general equilibrium setting.

Suggested Citation

  • Michael Magill & Martine Quinzii, 1997. "Which improves welfare more: A nominal or an indexed bond?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(1), pages 1-37.
  • Handle: RePEc:spr:joecth:v:10:y:1997:i:1:p:1-37
    Note: Received: July 31, 1995; revised version August 7, 1996
    as

    Download full text from publisher

    File URL: http://link.springer.de/link/service/journals/00199/papers/7010001/70100001.pdf
    Download Restriction: Access to the full text of the articles in this series is restricted

    File URL: http://link.springer.de/link/service/journals/00199/papers/7010001/70100001.ps.gz
    Download Restriction: Access to the full text of the articles in this series is restricted
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Viard, Alan D, 1993. "The Welfare Gain from the Introduction of Indexed Bonds," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 612-628, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael Magill & Martine Quinzii, "undated". "Equity, Bonds, Growth And Inflation In A Quadratic Infinite Horizon Economy," Department of Economics 98-08, California Davis - Department of Economics.
    2. Jürgen Eichberger & Klaus Rheinberger & Martin Summer, 2014. "Credit risk in general equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(2), pages 407-435, October.
    3. Durdu, Ceyhun Bora, 2009. "Quantitative implications of indexed bonds in small open economies," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 883-902, April.
    4. Minwook KANG, 2014. "Sunspots and Inflation-indexed Bonds," Economic Growth Centre Working Paper Series 1401, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    5. Peters, David W., 2007. "The behavior of government of Canada real return bond returns," International Review of Financial Analysis, Elsevier, vol. 16(2), pages 152-171.
    6. repec:onb:oenbwp:y::i:172:b:1 is not listed on IDEAS
    7. Eisei Ohtaki & Hiroyuki Ozaki, 2015. "Monetary equilibria and Knightian uncertainty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(3), pages 435-459, August.
    8. Michael Magill & Martine Quinzii, "undated". "Equity, Bonds, Growth And Inflation In A Quadratic Infinite Horizon Economy," Department of Economics 98-08, California Davis - Department of Economics.
    9. Patrick Minford & Eric Nowell & Bruce Webb, 2003. "Nominal Contracting and Monetary Targets -- Drifting into Indexation," Economic Journal, Royal Economic Society, vol. 113(484), pages 65-100, January.
    10. Minwook Kang, 2020. "Inflation‐Indexed Bonds and Nominal Bonds: Financial Innovation and Precautionary Motives," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(4), pages 721-745, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Juan Angel Garcia & Adrian van Rixtel, 2007. "Inflation-linked bonds from a central bank perspective," Occasional Papers 0705, Banco de España.
    2. Philipp Karl Illeditsch, 2018. "Residual Inflation Risk," Management Science, INFORMS, vol. 64(11), pages 5289-5314, November.
    3. LuisM. Viceira & John Y. Campbell, 2001. "Who Should Buy Long-Term Bonds?," American Economic Review, American Economic Association, vol. 91(1), pages 99-127, March.
    4. Minwook Kang, 2020. "Inflation‐Indexed Bonds and Nominal Bonds: Financial Innovation and Precautionary Motives," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(4), pages 721-745, June.
    5. Peters, David W., 2007. "The behavior of government of Canada real return bond returns," International Review of Financial Analysis, Elsevier, vol. 16(2), pages 152-171.
    6. David Eagle, 2005. "Completing Markets in a One-Good, Pure Exchange Economy Without State-Contingent Securities," Finance 0501009, University Library of Munich, Germany.
    7. Jeffrey R. Brown & Olivia S. Mitchell & James M. Poterba, 2001. "The Role of Real Annuities and Indexed Bonds in an Individual Accounts Retirement Program," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 321-370, National Bureau of Economic Research, Inc.
    8. Pu Shen, 1995. "Benefits and limitations of inflation indexed Treasury bonds," Economic Review, Federal Reserve Bank of Kansas City, vol. 80(Q III), pages 41-56.

    More about this item

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joecth:v:10:y:1997:i:1:p:1-37. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.