SFB 303 Discussion Paper No. A - 511

Author: Magill, Michael, and Martine Quinzii
Title: Which Improves Welfare More: Nominal or Indexed Bond?
Abstract: Economists have long argued that loan contracts should be indexed to remove the risks arising from fluctuations in the purchasing power of money: indexation however while eliminating one risk, sustitutes another, arising from fluctuations in relative prices of goods. We present a theoretical framework which permits the relative merits of a nominal versus and an indexed bond to be assessed in a general equilibrium setting.
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Creation-Date: December 1995
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