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Indexed Bonds


  • Rost van Tonningen, Nicholas A.
  • Sargent, John
  • Miller, Robin
  • Grady, Patrick


This paper discusses the pros and cons of establishing a system of indexed bonds as a means of assisting employers in the event that governments (federal and/or provincial) should require them to adjust pension payments under the pension plans for inflation. The main body of this paper is divided into three parts. The introduction describes briefly the mechanics of indexed bonds, the way inflation may affect the cost of indexed pensions, and, hence, the reasons why indexed bonds are being considered as a means of offsetting such inflationary impacts. It also notes the role of pension funds in the financial system in Canada. The second part appraises the possible impact of indexed bonds on the economy generally, on financial markets, and on government operations. It also briefly reviews the experience abroad with indexed bonds. The third part deals with the conclusions derived from the discussion. In addition, there are two annexes. One of these provides an estimate of the possible demand for and supply of indexed bonds. The other comments on the risk that with indexed bonds, public debt servicing might become less predictable.

Suggested Citation

  • Rost van Tonningen, Nicholas A. & Sargent, John & Miller, Robin & Grady, Patrick, 1979. "Indexed Bonds," MPRA Paper 43317, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43317

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    References listed on IDEAS

    1. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    2. Kai Carstensen & Oliver Hülsewig & Timo Wollmershäuser, 2009. "Monetary Policy Transmission and House Prices: European Cross Country Evidence," Working Paper / FINESS 7.4, DIW Berlin, German Institute for Economic Research.
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    4. Chiuri, Maria Concetta & Jappelli, Tullio, 2003. "Financial market imperfections and home ownership: A comparative study," European Economic Review, Elsevier, vol. 47(5), pages 857-875, October.
    5. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
    6. Reinold, Kate, 2011. "Housing equity withdrawal since the financial crisis," Bank of England Quarterly Bulletin, Bank of England, vol. 51(2), pages 127-133.
    7. Ben S. Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 77-128.
    8. Massimo Giuliodori, 2005. "The Role Of House Prices In The Monetary Transmission Mechanism Across European Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(4), pages 519-543, September.
    9. Frederic S. Mishkin, 2007. "Housing and the monetary transmission mechanism," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 359-413.
    10. Bjørnland, Hilde C. & Jacobsen, Dag Henning, 2010. "The role of house prices in the monetary policy transmission mechanism in small open economies," Journal of Financial Stability, Elsevier, vol. 6(4), pages 218-229, December.
    11. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, January.
    12. Muellbauer, John, 1992. "Anglo-German differences in housing market dynamics : The role of institutions and macro economic policy," European Economic Review, Elsevier, vol. 36(2-3), pages 539-548, April.
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    More about this item


    indexed bonds; government debt; macroeconomic stability;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt


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