Indexed Units of Account: Theory and Assessment of Historical Experience
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, the 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 are solved by creating such indexed units of account. The author advocates creating such units in other countries, even countries with relatively low rates of inflation such as the United States, and argues that an alternative definition of the units, relating the units to measures of income, may also be advantageous. Ideally, such 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.
|Date of creation:||Feb 1998|
|Date of revision:|
|Publication status:||Published in F. Lefort, K. Schmidt-Hebbel, and N. Loayza (eds.), Indexation, Inflation and Monetary Policy, Vol. 2, Central Bank of Chile, 2002, pp. 105-134|
|Contact details of provider:|| Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA|
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.yale.edu/
More information through EDIRC
|Order Information:|| Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Y. Campbell & Robert J. Shiller, 1996.
"A Scorecard for Indexed Government Debt,"
NBER Working Papers
5587, National Bureau of Economic Research, Inc.
- 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.
- Robert J. Barro, 1995.
"Inflation and Economic Growth,"
NBER Working Papers
5326, National Bureau of Economic Research, Inc.
- David Card & Dean Hyslop, 1996.
"Does Inflation "Grease the Wheels of the Labor Market"?,"
NBER Working Papers
5538, National Bureau of Economic Research, Inc.
- David Card & Dean Hyslop, 1997. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 71-122 National Bureau of Economic Research, Inc.
- Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
- Michael D. Bordo & Anna J. Schwartz, 1987. "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.
- 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.
- Irving Fisher, 1913. "A Compensated Dollar," The Quarterly Journal of Economics, Oxford University Press, vol. 27(2), pages 213-235.
- Willard C. Fisher, 1913. "The Tabular Standard in Massachusetts History," The Quarterly Journal of Economics, Oxford University Press, vol. 27(3), pages 417-454.
When requesting a correction, please mention this item's handle: RePEc:cwl:cwldpp:1171. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Matthew C. Regan)
If references are entirely missing, you can add them using this form.