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The Invention of Inflation-Indexed Bonds in Early America

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  • Robert Shiller

Abstract

The world's first known inflation-indexed bonds were issued by the Commonwealth of Massachusetts in 1780 during the Revolutionary War. These bonds were invented to deal with severe wartime inflation and with angry discontent among soldiers in the U.S. Army with the decline in purchasing power of their pay. Although the bonds were successful, the concept of indexed bonds was abandoned after the immediate extreme inflationary environment passed, and largely forgotten until the twentieth century. In 1780, the bonds were viewed as at best only an irregular expedient, since there was no formulated economic theory to justify indexation.

Suggested Citation

  • Robert Shiller, 2003. "The Invention of Inflation-Indexed Bonds in Early America," Yale School of Management Working Papers amz2611, Yale School of Management, revised 01 Mar 2004.
    • Handle: RePEc:ysm:wpaper:amz2611
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    References listed on IDEAS

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    1. Robert J. Shiller, 1997. "Public Resistance to Indexation: A Puzzle," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 159-228.
    2. John Y. Campbell & Robert J. Shiller, 1996. "A Scorecard for Indexed Government Debt," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 155-208, National Bureau of Economic Research, Inc.
    3. Willard C. Fisher, 1913. "The Tabular Standard in Massachusetts History," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 27(3), pages 417-454.
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