Nominal versus indexed debt
Subtitle: a quantitative horse race
By: Laura Alfaro, Fabio Kanczuk
Contributors: Kanczuk, Fabio; National Bureau of Economic Research
Series: NBER working paper series -- working paper 13131; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13131.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Description: "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, government outlays uncertainty, and contingent-debt service.  Our framework also recognizes that contingent debt can be associated with incentive problems and lack of commitment.  Thus, the benefits of unexpected inflation are tempered by higher interest rates.  We obtain that costs from inflation more than offset the benefits from reducing tax distortions.  We further discuss sustainability of nominal debt in developing (volatile) countries"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/19/2007.

Includes bibliographical references.

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