Inflation-indexed bonds and nominal bonds : financial innovation and precautionary motives

• Main Author: Kang, Minwook
• Other Authors: School of Social Sciences
• Format: Article
• Language: English
• Published: 2021
• Subjects: Social sciences::Economic theory; Inflation-indexed Bond; Precautionary Motive
• Online Access: https://hdl.handle.net/10356/151242
• Institution: Nanyang Technological University

This paper introduces a two-period monetary general equilibrium model with proportional transaction costs on nominal and inflation-indexed bonds. This paper demonstrates that financial innovation on indexed bonds causes equilibrium interest rates of the nominal bond to increase when agents have prec...