NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Indexing and Inflation

Stanley Fischer

NBER Working Paper No. 670
Issued in May 1981
NBER Program(s):   EFG

Much of the opposition to indexation as a means of adapting to on going inflation arises from the view that indexation is itself inflationary. This paper examines the basis for that view in a simple macroeconomic model in which budget deficits are in part financed through the printing of money. It is shown that all aspects of indexing -- wage indexation, bond indexation, and tax indexation -- tend to increase the impact on the price level of any inflationary shock. However, this association between indexation and inflation is in large part a consequence of the monetary and fiscal policies being followed by the government. Evidence from a cross-section of forty countries on the effects of indexation on the inflationary impact of the oil price shock of 1974 suggests that indexation did not in general increase the inflationary impact of the oil shock. However, the impact of the oil shock was significantly stronger in those countries that had adopted bond indexation.

download in pdf format
   (591 K)

email paper

This paper is available as PDF (591 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0670

Published: Fischer, Stanley. "Indexing and Inflation." Journal of Monetary Economics, Vol. 12, (1983), pp. 519-541.

Users who downloaded this paper also downloaded these:
Fischer w1235 Inflation and Growth
Fischer and Modigliani w0303 Towards An Understanding of the Real Effects and Costs of Inflation
Fischer w1497 Real Balances, the Exchange Rate and Indexation: Real Variables in Disinflation
Fischer and Summers w2815 Should Nations Learn to Live With Inflation?
Stock and Watson w7023 Forecasting Inflation
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us