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The Rationale and Design of Inflation-Indexed Bonds

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  • Mr. 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

  • Mr. Robert T Price, 1997. "The Rationale and Design of Inflation-Indexed Bonds," IMF Working Papers 1997/012, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1997/012
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    Citations

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    Cited by:

    1. Ms. Zsofia Arvai & Mr. Geoffrey M Heenan, 2008. "A Framework for Developing Secondary Markets for Government Securities," IMF Working Papers 2008/174, International Monetary Fund.
    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. Beauregard, Remy & Christensen, Jens H.E. & Fischer, Eric & Zhu, Simon, 2024. "Inflation expectations and risk premia in emerging bond markets: Evidence from Mexico," Journal of International Economics, Elsevier, vol. 151(C).
    4. Laura Alfaro & Fabio Kanczuk, 2006. "Sovereign Debt: Indexation and Maturity," Research Department Publications 4459, Inter-American Development Bank, Research Department.
    5. Cristhian Hernando Ruiz Cardozo & Jens H. E. Christensen, 2023. "The Benefit of Inflation-Indexed Debt: Evidence from an Emerging Bond Market," Working Paper Series 2023-04, Federal Reserve Bank of San Francisco.
    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 - Leibniz Centre for European Economic Research.
    7. 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.
    8. Andreas Reschreiter, 2010. "The inflation protection from indexed bonds," Applied Economics Letters, Taylor & Francis Journals, vol. 17(16), pages 1581-1585.
    9. Afonso S. Bevilaqua, 2001. "The Structure of Public Sector Debt in Brazil," Research Department Publications 3121, Inter-American Development Bank, Research Department.
    10. Jane Mpapalika, 2020. "Alternative Financing Instruments for African Economies," 2020 Papers pmp2, Job Market Papers.
    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. 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.
    14. Mervyn King & David Low, 2014. "Measuring the ''World'' Real Interest Rate," NBER Working Papers 19887, National Bureau of Economic Research, Inc.
    15. 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.
    16. Mr. Obert Nyawata, 2012. "Treasury Bills and/Or Central Bank Bills for Absorbing Surplus Liquidity: The Main Considerations," IMF Working Papers 2012/040, International Monetary Fund.
    17. 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.
    18. Obert Nyawata, 2013. "Treasury Bills And/Or Central Bank Bills For Absorbing Surplus Liquidity: The Main Considerations," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(02), pages 1-32.
    19. Gerardo M Licandro, 2001. "Monetary Policy Coordination, Monetary Integration and other essays," Levine's Working Paper Archive 625018000000000172, David K. Levine.
    20. 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.
    21. Alberto Di Iorio & Marco Fanari, 2020. "Break-even inflation rates: the Italian case," Questioni di Economia e Finanza (Occasional Papers) 578, Bank of Italy, Economic Research and International Relations Area.
    22. Bank for International Settlements, 2007. "Financial stability and local currency bond markets," CGFS Papers, Bank for International Settlements, number 28.
    23. Laura Alfaro & Fabio Kanczuk, 2006. "Deuda soberana: indexación y vencimiento," Research Department Publications 4460, Inter-American Development Bank, Research Department.
    24. Camba-Méndez, Gonzalo, 2020. "On the inflation risks embedded in sovereign bond yields," Working Paper Series 2423, European Central Bank.

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