The rising uncertainty in financial markets in the last 40 years has led to the creation of new financial indices that will enable these uncertainties to be defined and measured. For this purpose, the first volatility index created was the VIX Index as an indicator of uncertainty in the stock...

This paper presents a simple model in which debt management stabilizes the debt-to-GDP ratio in face of shocks to real returns and output growth and thus supports fiscal restraint in ensuring sustainability. The optimal composition of public debt is derived by looking at the relative impact of...

This paper examines how price setting plays a key role in explaining the steady-state effects of inflation in a monopolistic competition economy. Three pricing variants (optimal prices, indexed prices, and unchanged prices) are introduced through a generalization of the Calvo-type setting that...

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...

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...

This paper examines the optimal location-based redistribution policy and shows that adjustment for local price levels is occasionally optimal, but never for the reasons suggested by the popular press. First, the existence of a spatial equilibrium suggests that utility levels will be equalized...

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...

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...

Inflation-linked bond markets have experienced significant growth in recent years. This growth is somewhat surprising, for inflation-linked bonds cannot be considered a financial innovation and their development has taken place in a period of historically low global inflation and inflation...

We reconsider the problem of indexation of public pensions, emphasizing that similar contribution paths should imply similar benefit paths. This robustness criterion is only satisfied by full wage indexing, which in turn requires the politically unpopular reduction of the accrual rates. To...

Initial public pensions are indexed to the economy-wide average wages, but pensions in progress are indexed to prices, average wages or their combinations - varying across countries and periods. We create a simple overlapping cohorts framework to study the properties of indexing pensions in...

Initial public pensions are indexed to the economy-wide average wages, but pensions in progress are indexed to prices, average wages or their combinations - varying across countries and periods. We create a simple overlapping cohorts framework to study the properties of indexing pensions in...

In this paper, I study the impact of the COVID-19 on S&P 500 index using daily data from January 1, 2020, to May 12, 2020. The result shows that the number of confirmed cases, the number of deaths, and the number of recovery cases are the main parameters that affect the S&P 500 index. The first...

We examine the effect of monetary policy on household spending when households are indebted and interest rates on outstanding loans are linked to short-term interest rates. Using administrative data on balance sheets and consumption expenditure of Swedish households, we reveal the cash-flow...

We derive the price of inflation-indexed bonds of which the payments are linked to a lagged price index, and solve for the optimal bond portfolio under both inflation and indexation lags in closed form. We show that indexation lags increase the number of state variables characterizing both the...

Inflation risks are explicit in either (i) the nominal pricing of real payoffs in which prices are denominated in dollars, or (ii) the real pricing of nominal payoffs in which prices are denominated in consumption baskets. While the former involves over-the-counter inflation-indexed contracts of...

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...

Due to various causes, the pension contribution rate can be reduced temporarily below its long-term value. We call a reduction forced if the balance of the public pension system is preserved through excessive wage-hikes and irritable relative devaluation of pensions in progress. A very simple...

We reconsider the problem of indexation of public pensions, emphasizing that similar contribution paths should imply similar benefit paths. This robustness criterion is only satisfied by full wage indexing, which in turn requires the politically unpopular reduction of the accrual rates. To...

Due to various causes, the pension contribution rate can be reduced temporarily below its long-term value. We call a reduction forced if the balance of the public pension system is preserved through excessive wage-hikes and irritable relative devaluation of pensions in progress. A very simple...

This paper investigates the optimal investment strategy for a defined contribution (DC) pension plan during the decumulation phase which is risk-averse and pays close attention to inflation risk. The plan aims to maximize the expected constant relative risk aversion (CRRA) utility from the...

The decreasing purchasing power of money has been one of the most intriguing problems not only for the economists but also for the savers, lenders, and consumers. The inflationary tendency that enveloped the world economy after World War II and assumed alarming proportion during the seventies...

In this paper we explore how small countries such as Malaysia, Singapore, and Taiwan, can offer their aging populations the means to protect their retirement income against inflation without the governments directly issuing inflation‐protected bonds. While inflation swaps are a well‐known...

Examines the evolution of the cyclicality of real wages and employment in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical during the 1980s and early 1990s, a period characterized by high inflation. As inflation...

We examine the cash-flow channel of monetary policy, i.e. the effect of monetary policy on spending when households hold debt linked to short-term rates such as adjustable rate mortgages (ARMs). Using registry-based data on Swedish households, we estimate substantial heterogeneity in consumption...

Fleckenstein et al. (2014) document that nominal Treasuries trade at higher prices than inflation-swapped indexed bonds, which exactly replicate the nominal cash flows. We study whether this mispricing arises from liquidity premiums in inflation-indexed bonds (TIPS) and inflation swaps. Using US...

Order book and transactions data from the U.S. Treasury securities market are used to calculate daily measures of bid-ask spreads, depth, and price impact for a twenty-six-year sample period (1991-2017). From these measures, a daily index of Treasury market liquidity is constructed, reflecting...

Examines the evolution of the cyclicality of real wages and employment in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical during the 1980s and early 1990s, a period characterized by high inflation. As inflation...

We examine the cash-flow channel of monetary policy, i.e. the effect of monetary policy on spending when households hold debt linked to short-term rates such as adjustable rate mortgages (ARMs). Using registry-based data on Swedish households, we estimate substantial heterogeneity in consumption...

Fleckenstein et al. (2014) document that nominal Treasuries trade at higher prices than inflation-swapped indexed bonds, which exactly replicate the nominal cash flows. We study whether this mispricing arises from liquidity premiums in inflation-indexed bonds (TIPS) and inflation swaps. Using US...

Debt sustainability is fundamentally a probabilistic concept: Debt is rarely sustainable with probability one. We propose an index of external debt sustainability that reflects this uncertainty. Namely we construct the index as the probability that, at the current exchange rate, net external...

Order book and transactions data from the U.S. Treasury securities market are used to calculate daily measures of bid-ask spreads, depth, and price impact for a twenty-six-year sample period (1991-2017). From these measures, a daily index of Treasury market liquidity is constructed, reflecting...

Debt sustainability is fundamentally a probabilistic concept: Debt is rarely sustainable with probability one. We propose an index of external debt sustainability that reflects this uncertainty. Namely we construct the index as the probability that, at the current exchange rate, net external...

There is no reason to doubt the significance of the inflation index for economic development or the fact that the inflation indicator is used as a central bank's target. The critics of inflation targeting believe that the association of a central bank's monetary policy with the planned inflation...

Pensions are the main source of income in old age. Their main value is provided, in most countries, by public pension systems. Therefore, one of the main challenges for governments and policymakers is to enable people to smooth consumption over the life cycle in an appropriate scale. This...

This paper examines the evolution of the cyclicality of real wages and employment in four Latin American economies (Brazil, Chile, Colombia and Mexico) during the period 1980-2010. Wages are highly pro-cyclical during the 1980s and early 1990s, a period characterized by high inflation. As...