Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal … growth evolve over time under the true distribution, and this difference makes excess returns on long-term bonds predictable …

(TIPS) bonds as part of the government debt portfolio to commit not to create elevated inflation? We thus examine optimal … debt management in a setting where (i) the government can issue long-term nominal and real bonds, (ii) the monetary …. Nominal debt can be inflated away giving ex-ante flexibility, but real bonds constitute a real commitment ex-post. We show …

governments use real bonds (TIPS) as part of their debt portfolio to commit to stable inflation rates? We propose a novel … state-contingent bonds. Nominal debt can be inflated away giving ex-ante flexibility, whereas real bonds are cheaper but …