Inflation and debt indexation: the equivalence of two alternative schemes for the case of periodic payments

Clovis de Faro

No 248, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: The presence of inflation has induced the financial institutions to implement procedures devised to protect the real values of theirs loans. Two of such procedurcs, the floaaing rale scheme and the monetary correction mechanism, tend to lead to very different streams of payments. However, whenever the floating rate scheme follows the rule of Strict adhercnce to lhe Fisher equation, lhe two procedures are financially equivalent.

Date: 1994-10
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