Skip to main content
  • Get access
    Check if you have access via personal or institutional login
  • Cited by 20
  • Cited by
    This (lowercase (translateProductType product.productType)) has been cited by the following publications. This list is generated based on data provided by CrossRef.

    Ilyina, Anna Guscina, Anastasia and Kamil, Herman 2010. Does Procyclical Fiscal Policy Reinforce Incentives to Dollarize Sovereign Debt?. IMF Working Papers, Vol. 10, Issue. 168, p. 1.

    Bacha, Edmar L. Holland, Márcio and Gonçalves, Fernando M. 2009. Systemic Risk, Dollarization, and Interest Rates in Emerging Markets: A Panel-Based Approach. The World Bank Economic Review, Vol. 23, Issue. 1, p. 101.

    Miller, Victoria 2009. Inflation Uncertainty and Optimal Debt Maturity: An Empirical Look at Canadian and U. S. Government Bonds. Canadian Journal of Administrative Sciences / Revue Canadienne des Sciences de l'Administration, Vol. 14, Issue. 3, p. 246.

    Nosbusch, Yves 2008. Interest Costs and the Optimal Maturity Structure Of Government Debt. The Economic Journal, Vol. 118, Issue. 527, p. 477.

    Kletzer, Kenneth 2006. International Financial Integration, Sovereignty, and Constraintson Macroeconomic Policies. IMF Working Papers, Vol. 06, Issue. 79, p. 1.

    Sleet, Christopher 2004. Optimal Taxation with Private Government Information. The Review of Economic Studies, Vol. 71, Issue. 4, p. 1217.

    Eichengreen, Barry Hausmann, Ricardo and Panizza, Ugo 2003. Le péché originel : le calvaire, le mystère et le chemin de la rédemption. L'Actualité économique, Vol. 79, Issue. 4, p. 419.

    Jahjah, Samir 2001. Financial Stability and Fiscal Crises in a Monetary Union. IMF Working Papers, Vol. 01, Issue. 201, p. 1.

    2000. Sovereign Assets and Liabilities Management.

    Drudi, Francesco and Giordano, Raffaela 2000. Default risk and optimal debt management. Journal of Banking & Finance, Vol. 24, Issue. 6, p. 861.

    Drudi, Francesco and Prati, Alessandro 2000. Signaling fiscal regime sustainability. European Economic Review, Vol. 44, Issue. 10, p. 1897.

    Goldfajn, Ilan 2000. Public debt indexation and denomination: the case of Brazil. International Journal of Finance & Economics, Vol. 5, Issue. 1, p. 43.

    Jahjah, Samir 2000. Inflation, Debt, and Default in a Monetary Union. IMF Working Papers, Vol. 00, Issue. 179, p. 1.

    Prati, Alessandro and Drudi, Francesco 1999. Signaling Fiscal Regime Sustainability. IMF Working Papers, Vol. 99, Issue. 86, p. 1.

    Goldfajn, Ilan 1998. Public Debt Indexation and Denomination: The Case of Brazil. IMF Working Papers, Vol. 98, Issue. 18, p. 1.

    MILLER, VICTORIA 1997. POLITICAL INSTABILITY AND DEBT MATURITY. Economic Inquiry, Vol. 35, Issue. 1, p. 12.

    Miller, Victoria 1997. Why a government might want to consider foreign currency denominated debt. Economics Letters, Vol. 55, Issue. 2, p. 247.

    Faria, Joao Ricardo and Carneiro, Francisco. G. 1997. The indexation of wages and bonds in Brazil. Applied Economics, Vol. 29, Issue. 11, p. 1459.

    Miller, Victoria 1996. Exchange rate uncertainty, consumption preferences and the currency denomination of external debt. Applied Financial Economics, Vol. 6, Issue. 3, p. 199.

    Guidotti, Pablo Emilio and Calvo, Guillermo 1990. Management of the Nominal Public Debt Theory and Applications. IMF Working Papers, Vol. 90, Issue. 115, p. 1.

  • Print publication year: 1990
  • Online publication date: July 2011

3 - Indexation and maturity of government bonds: an exploratory model



Very few economists would nowadays deny that the stock of money and the price level are closely related variables. In fact, cross-country empirical analyses (see, e.g., Vogel, 1974; Lucas, 1980; Lothian, 1985; Calvo, 1987) and even a cursory look at the data eloquently shows that a nonbeliever in this basic ‘monetarist’ proposition would have a hard time making his case (except, perhaps, for recent periods when the very definition of the relevant stock-of-money concept is somewhat controversial). However, if money growth is the main cause of inflation, and the relationship is well understood, why is it then that inflation has not been completely eradicated? A possible answer is that at times countries rely on the inflation tax as a source of fiscal revenue. In fact, Phelps (1973) has given rise to a literature which suggests that a sensible reliance on the inflation tax could even be socially optimal (see, e.g., Végh, 1989; Guidotti and Végh, 1988; and the references therein). Interestingly, however, there are many instances in which the inflation tax appears to be larger than any sensible social welfare function would dictate. The phenomenon becomes self-evident in hyperinflation episodes. An answer to this puzzle was given in Calvo (1978) where it is shown that money creation becomes an attractive fiscal revenue source when its present use has little effect on expectations about future monetary/fiscal policy (a characteristic of non-reputational rational-expectations equilibria). Thus, for each successive government it is optimal to engineer ‘high’ inflation.

Recommend this book

Email your librarian or administrator to recommend adding this book to your organisation's collection.

Public Debt Management
  • Online ISBN: 9780511628528
  • Book DOI:
Please enter your name
Please enter a valid email address
Who would you like to send this to *