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On Indexed Bonds and Aggregate Demand Elasticity

Author

Listed:
  • Ben Kyer
  • Gary Maggs

Abstract

Bonds indexed to the price level or inflation have become popular and more common in the industrialized world. This paper examines the impact of indexed bonds on the price level elasticity of aggregate demand. With a model of aggregate demand based on the standard IS-LM framework and expanded to differentiate between bonds which are indexed to the price level and bonds which are not so indexed, we find that the existence of indexed bonds decreases the elasticity of aggregate demand with respect to the general price level. Copyright International Atlantic Economic Society 2009

Suggested Citation

  • Ben Kyer & Gary Maggs, 2009. "On Indexed Bonds and Aggregate Demand Elasticity," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 17-21, March.
    • Handle: RePEc:kap:atlecj:v:37:y:2009:i:1:p:17-21
    DOI: 10.1007/s11293-008-9151-9
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    References listed on IDEAS

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    1. Gambs, Carl M, 1974. "A Note on Macroeconomic Textbooks: The Use of The Aggregate Demand Curve," Journal of Economic Literature, American Economic Association, vol. 12(3), pages 896-898, September.
    2. Robert J. Shiller, 2003. "The Invention of Inflation-Indexed Bonds in Early America," NBER Working Papers 10183, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Aggregate demand; Elasticity; Bond indexation; E00;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General

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