The Invention of Inflation-Indexed Bonds in Early America

Robert Shiller

No 1442, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The world is first known inflation-indexed bonds were issued by the Commonwealth of Massachusetts in 1780 during the Revolutionary War. These bonds were invented to deal with severe wartime inflation and with angry discontent among soldiers in the U.S. Army with the decline in purchasing power of their pay. Although the bonds were successful, the concept of indexed bonds was abandoned after the immediate extreme inflationary environment passed, and largely forgotten until the twentieth century. In 1780, the bonds were viewed as at best only an irregular expedient, since there was no formulated economic theory to justify indexation.

Keywords: Indexation; Inflation History; Inflation-Indexed Securities; Inflation-Protected Securities; Index-linked gilts; Tabular Standard; United States; Massachusetts (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2003-10
New Economics Papers: this item is included in nep-his, nep-mac, nep-rmg and nep-tid
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Citations: View citations in EconPapers (12)

Published in William N. Goetzmann and Geert K. Rouwenhorst, editors, The Origins of Value: The Financial Innovations that Created Modern Capital Markets Oxford: Oxford University Press, 2005

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