The Indexation of Financial Assets

John H. Welch
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John H. Welch: Federal Reserve Bank of Dallas

Chapter 5 in Capital Markets in the Development Process, 1993, pp 124-151 from Palgrave Macmillan

Abstract: 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.

Keywords: Interest Rate; Inflation Rate; Financial Asset; Money Demand; Nominal Interest Rate (search for similar items in EconPapers)
Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-11211-1_6

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DOI: 10.1007/978-1-349-11211-1_6

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