On the Effects of Indexed Bonds in Developing Countries

Larry Samuelson

Oxford Economic Papers, 1988, vol. 40, issue 1, 168-92

Abstract: The government issue of indexed bonds is often suggested as a response to inflation. While issuing such bonds may initially appear to enchance the government's ability to control the economy, recent studies have described a variety of indexing-induced distortions. In light of this, an assessment of the desirability of indexing has been elusive. This paper exploits the envelope theorem to construct a framework within which the advantages and costs of indexing can be easily examined, and derives conditions under which optimal policies will include indexing. The impact of indexing can be captured in two effects: its tendency to transfer resources to the government and its tendency to reduce consumer liquidity. Indexing is more likely to be a preferred policy as the government is less concerned with bondholder utility levels. Copyright 1988 by Royal Economic Society.

Date: 1988
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://links.jstor.org/sici?sici=0030-7653%2819880 ... 0.CO%3B2-Q&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:oxecpp:v:40:y:1988:i:1:p:168-92

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Oxford Economic Papers is currently edited by James Forder and Francis J. Teal

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().