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The Rationale and Design of Inflation-Indexed Bonds

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  • Robert T Price

Abstract

A number of industrialized countries have recently offered inflation-indexed bonds. Some members of another group of countries that had earlier adopted more comprehensive indexation in response to high inflation have taken steps to reduce the scope of indexation in their economies. This paper surveys debt management, monetary policy, and welfare arguments on the use of inflation-indexed bonds, and relates these to the experiences of various issuers. The paper also considers some important design features of indexed bonds.

Suggested Citation

  • Robert T Price, 1997. "The Rationale and Design of Inflation-Indexed Bonds," IMF Working Papers 97/12, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:97/12
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    1. Tapsoba, Sampawende J.-A., 2014. "Options and strategies for fiscal consolidation in India," Economic Modelling, Elsevier, vol. 43(C), pages 225-237.
    2. Mundle, Sudipto & Bhanumurthy, N.R. & Das, Surajit, 2011. "Fiscal consolidation with high growth: A policy simulation model for India," Economic Modelling, Elsevier, vol. 28(6), pages 2657-2668.
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    4. Jean Drèze & Reetika Khera, 2013. "Rural Poverty And The Public Distribution System," Working papers 235, Centre for Development Economics, Delhi School of Economics.
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    Cited by:

    1. Giorgio Basevi & Lorenzo Pecchi & Gustavo Piga, 2005. "Parallel Monies, Parallel Debt: Lessons from the EMU and Options for the New EU," CEIS Research Paper 68, Tor Vergata University, CEIS.
    2. Bevilaqua, Afonso S & Garcia, Marcio G P, 2002. "Debt Management in Brazil: Evaluation of the Real Plan and Challenges Ahead," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(1), pages 15-35, January.
    3. Michael Schröder & Friedrich Heinemann & Susanne Kruse & Matthias Meitner, 2007. "Pay high in good times, pay low in bad times," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(5), pages 667-683.
    4. repec:wsi:jicepx:v:04:y:2013:i:02:n:s1793993313500117 is not listed on IDEAS
    5. Zsófia Árvai & Geoffrey M Heenan, 2008. "A Framework for Developing Secondary Markets for Government Securities," IMF Working Papers 08/174, International Monetary Fund.
    6. Schröder, Michael & Heinemann, Friedrich & Kruse, Susanne & Meitner, Matthias, 2004. "GPD-linked Bonds as a Financing Tool for Developing Countries and Emerging Markets," ZEW Discussion Papers 04-64, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    7. Gerardo M Licandro, 2001. "Monetary Policy Coordination, Monetary Integration and other essays," Levine's Working Paper Archive 625018000000000172, David K. Levine.
    8. Diaw, Abdou & Bacha, Obiyathulla Ismath & Lahsasna, Ahcene, 2014. "Public Sector Funding and Debt Management: A Case for GDP-Linked Ṣukūk," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 22, pages 185-216.
    9. Afonso S. Bevilaqua, 2001. "The Structure of Public Sector Debt in Brazil," Research Department Publications 3121, Inter-American Development Bank, Research Department.
    10. Susanne Kruse & Matthias Meitner & Michael Schroder, 2005. "On the pricing of GDP-linked financial products," Applied Financial Economics, Taylor & Francis Journals, vol. 15(16), pages 1125-1133.
    11. Diaw, Abdou & Bacha, Obiyathulla Ismath & Lahsasna, Ahcene, 2011. "Public Sector Funding and Debt Management: A Case for GDP-Linked Sukuk," MPRA Paper 46008, University Library of Munich, Germany, revised 2011.
    12. Reschreiter, Andreas, 2004. "Conditional funding costs of inflation-indexed and conventional government bonds," Journal of Banking & Finance, Elsevier, vol. 28(6), pages 1299-1318, June.
    13. Bank for International Settlements, 2007. "Financial stability and local currency bond markets," CGFS Papers, Bank for International Settlements, number 28.
    14. Reschreiter, Andreas, 2008. "Lower borrowing costs with inflation-indexed bonds: A trading rule based assessment," Economics Letters, Elsevier, vol. 99(2), pages 272-274, May.
    15. Geert Bekaert & Xiaozheng Wang, 2010. "Inflation risk and the inflation risk premium," Economic Policy, CEPR;CES;MSH, vol. 25, pages 755-806, October.

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    Keywords

    Inflation; bonds; indexed bonds; bond; monetary policy;

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