Controlling Inflation : The Problem of Non-Indexed Debt

We show that the presence of nominal non-indexed government debt could give rise to more than one equilibrium inflation rate. Conditions for this to occur are discussed in terms of ad hoc and micro-founded models. Solutions to the indeterminacy problem are examined; one solution is shown to be price indexation of debt instruments.
Publication date: March 1988
ISBN: 9781451980578
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Topics covered in this book

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Economics- Macroeconomics , Economics / General , International - Economics , inflation , nominal interest rate , rate of inflation , price level , monetary balances

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