MARC Record from Library of Congress

LEADER: 02440cam a22002897a 4500
001 2007702953
003 DLC
005 20071201091659.0
007 cr |||||||||||
008 071130s2007 dcu sb f000 0 eng
010 $a 2007702953
040 $aDLC$cDLC
050 00 $aHG3879
100 1 $aDurdu, Ceyhun Bora.
245 10 $aQuantitative implications of indexed bonds in small open economies$h[electronic resource] /$cCeyhun Bora Durdu.
260 $aWashington, D.C. :$bFederal Reserve Board,$c[2007]
490 1 $aInternational finance discussion papers ;$vno. 909
538 $aSystem requirements: Adobe Acrobat Reader.
538 $aMode of access: World Wide Web.
500 $aTitle from PDF file as viewed on 11/30/2007.
530 $aAlso available in print.
504 $aIncludes bibliographical references.
520 3 $a"This paper analyzes the macroeconomic implications of real-indexed bonds, indexed to the terms of trade or GDP, using a general equilibrium model of a small open economy with financial frictions. Although indexed bonds provide a hedge to income fluctuations and can thereby mitigate the effects of financial frictions, they introduce interest rate fluctuations. Because of this tradeoff, there exists a nonmonotonic relation between the "degree of indexation" (i.e., the percentage of the shock reflected in the return) and the benefits that these bonds introduce. When the nonindexed bond market is shut down and only indexed bonds are available, indexation strengthens the precautionary savings motive, increases consumption volatility and deepens the impact of Sudden Stops for degrees of indexation higher than a certain threshold. When the nonindexed bond market is retained, nonmonotonic relationship between the degree of indexation and the benefits of indexed bonds still remain. Degrees of indexation higher than a certain threshold lead to more volatile consumption than lower degrees of indexation. The threshold degree of indexation depends on the volatility and persistence of income shocks as well as on the relative openness of the economy"--Federal Reserve Board web site.
653 $aNdexed bonds;$adegree of indexation;$afinancial frictions;$asudden stops
710 2 $aBoard of Governors of the Federal Reserve System (U.S.)
830 0 $aInternational finance discussion papers (Online) ;$vno. 909.
856 40 $uhttp://www.federalreserve.gov/pubs/ifdp/2007/909/default.htm