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Inflation and debt indexation: the equivalence of two alternative schemes for the case of periodic payments

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  • Faro, Clovis de

Abstract

The presence of inflation has induced the financial institutions to implement procedures devised to protect the real values of theirs loans. Two of such procedurcs, the floaaing rale scheme and the monetary correction mechanism, tend to lead to very different streams of payments. However, whenever the floating rate scheme follows the rule of Strict adhercnce to lhe Fisher equation, lhe two procedures are financially equivalent.

Suggested Citation

  • Faro, Clovis de, 1994. "Inflation and debt indexation: the equivalence of two alternative schemes for the case of periodic payments," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 248, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:248
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