An indexed unit of account is a unit of measurement defined using an index such as a consumer price index so that prices defined in terms of these units will automatically adjust to changing economic conditions. Evidence on sticky prices and money illusion, and evidence from countries (notably...

Risk often inhibits on-farm investment by smallholder farmers. Recent evidence indicates that index insurance and stress tolerant seeds can separately and partially offset this risk effect. In this study, we explore whether the complementarities between these two risk management technologies can...

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....

We analyze both the uses side and the sources side incidence of domestic climate policy using an analytical general equilibrium model, taking into account the degree of government program indexing. When transfer programs such as Social Security are explicitly indexed to inflation, higher energy...

Social Security is widely believed to protect its recipients from inflation because benefits are indexed to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, the CPI-W may not accurately reflect the experience of retirees for two reasons. First, retirees...

This paper explores the history of inflation-indexed bond markets in the US and the UK. It documents a massive decline in long-term real interest rates from the 1990's until 2008, followed by a sudden spike in these rates during the financial crisis of 2008. Breakeven inflation rates, calculated...

The main arguments in favor and against nominal and indexed debt are the incentive to default through inflation versus hedging against unforeseen shocks. We model and calibrate these arguments to assess their quantitative importance. We use a dynamic equilibrium model with tax distortion,...

The world's 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...

A typical household has a home mortgage as its most significant financial contract. The form of this contract is correspondingly important. This paper studies the choice between a fixed-rate (FRM) and an adjustable-rate (ARM) mortgage. In an environment with uncertain inflation, a nominal FRM...

An indexed unit of account is a money analogue, used to express prices; the unit's" purchasing power is defined by an index. Indexed units of account are not true money in that" they are not used as a medium of exchange. The first successful indexed unit of account Unidad de Fomento (UF) has...