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The Indexation of Financial Assets

In: Capital Markets in the Development Process

Author

Listed:
  • John H. Welch

    (Federal Reserve Bank of Dallas)

Abstract

The military government that took power in 1964 concentrated initially on reducing the inflation rate. This was attempted through ‘gradualist’ policies which were thought more appropriate for a fragile economy that could not absorb a ‘shock treatment’ stabilisation programme.1 Admitting that inflation would not fall instantaneously to low levels, the Castello Branco administration, specifically Minister of Finance Octávio Gouvêia de Bulhões and Minister of Planning Roberto de Oliveira Campos, concentrated on minimising distortions which had been caused by inflation, especially in financial markets.2 The main innovation was the creation of indexed bonds, Adjustable Obligations of the National Treasury (ORTNs), which were followed by other indexed assets. As Table 5.1 shows, indexed financial assets came to dominate financial markets over the period 1964–85 increasing from 4.7% of non-indexed assets in 1965 to around two times the size of non-indexed assets in 1985.

Suggested Citation

  • John H. Welch, 1993. "The Indexation of Financial Assets," Palgrave Macmillan Books, in: Capital Markets in the Development Process, chapter 5, pages 124-151, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-11211-1_6
    DOI: 10.1007/978-1-349-11211-1_6
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