NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Scorecard for Indexed Government Debt

John Y. Campbell, Robert J. Shiller

NBER Working Paper No. 5587
Issued in May 1996
NBER Program(s):   AP   EFG   ME

Within the last five years, Canada, Sweden and New Zealand have joined the ranks of the United Kingdom and other countries in issuing government bonds that are indexed to inflation. Some observers of the experience in these countries have argued that the United States should follow suit. This paper provides an overview of the issues surrounding debt indexation, and it tries to answer three empirical questions about indexed debt. First, how different would the returns on indexed bonds be from the returns on existing US debt instruments? Second, how would indexed bonds affect the government's average financing costs? Third, how might the Federal Reserve be able to use the information contained in the prices of indexed bonds to help formulate monetary policy? The paper concludes with a more speculative discussion of the possible consequences of increased use of indexed debt contracts by the private sector.

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Document Object Identifier (DOI): 10.3386/w5587

Published: A Scorecard for Indexed Government Debt, John Y. Campbell, Robert J. Shiller. in NBER Macroeconomics Annual 1996, Volume 11, Bernanke and Rotemberg. 1996

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