Question A:
By issuing inflation-indexed bonds, and thereby providing a long-term real safe asset for pension funds and retirement savers, governments can make a substantial contribution to social welfare.
Responses
Responses weighted by each expert's confidence
Question B:
Issuance of inflation-indexed bonds substantially helps government commit to a responsible fiscal and monetary policy.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 John Campbell |
Harvard | Bio/Vote History | ||
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Whenever long-run inflation prospects are uncertain (as is the case at present), government inflation-indexed bonds provide a safe real return that is not available from any other assets and that is important to offer to retirement savers and other long-term investors.
-see background information here |
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Inflation indexed bonds are an important security. But it is not necessary for governments to "provide" securities. Those bonds are repaid by taxes, so one pocket to another. The reluctance of the private sector, with real revenues, to issue index linked bonds is a puzzle.
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 Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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Many people want access to safe inflation-hedged ways to save. Even though issuing linkers is often not the cheapest way for governments to fund themselves, they can nevertheless offer linkers as a welfare enhancing opportunity to these savers.
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 Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Xavier Gabaix |
Harvard | Bio/Vote History | ||
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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Many retail investors do not have access to inflation hedging strategies and TIPS may be useful for these investors.
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 David Hirshleifer |
USC | Bio/Vote History | ||
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 Harrison Hong |
Columbia | Bio/Vote History | ||
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Households could use more simple products to hedge inflation.
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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it definitely helps, for it be substantial the number of people holding them needs to be more dispersed. it is disappointing that so few people have exposure to this asset class.
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 Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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 Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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If they have the fiscal capacity to pay for it
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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In practice these bonds have tended to be illiquid and attract mixed interest. There are a number of measurement and indexing issues. The practical impact has been somewhat disappointing even if there are good theoretical reasons for this market to exist.
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 Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Tobias Moskowitz |
Yale School of Management | Did Not Answer | Bio/Vote History | |
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Based on economic principles, this seems right. On the other hand, if inflation-indexed bonds were in short supply, they should trade at a premium price. But the evidence indicates that they trade at a discount. Perhaps the discount is all due to illiquidity, though.
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Inflation indexed bonds reduce the need for derivatives to hedge inflation risk and so reduce leverage and complexity in the financial system. They also reduce the governments temptation to inflate away debt, although also the ability to do so in bad times.
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 Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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 Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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 Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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Research has shown that the issuance of inflation-indexed bonds has a significant impact on welfare, as it provides long-term investors with a riskless long-term investment vehicle.
-see background information here |
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Bio/Vote History | ||
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 Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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A number of investors are likely to want to lock in a real long term return. The interesting question is why these need to be Treasury contracts, e.g., why the equivalent of TIPs are not issued by private firms.
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Real bonds complete the payoff space and show up in optimal portfolios of stocks, nominal bonds, and real bonds. Very few other assets are good inflation hedges.
-see background information here |
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 Ingrid M. Werner |
OSU Fisher School | Did Not Answer | Bio/Vote History | |
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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John Campbell |
Harvard | Bio/Vote History | ||
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When inflation expectations are high, so that nominal interest rates are high, a government that intends to fight inflation finds nominal long-term borrowing expensive. Inflation-indexed bonds then reduce borrowing costs and signal the government's resolve.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Index bonds are like debt, repay or default. Nominal bonds are like equity, can inflate away. Both are useful! Indexed/foreign debt offers precommitment, but painful default in bad times. Debt/equity, index/nominal, ex ante/ex post, bailout/moral hazard always tough questions!
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Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Binding a country's finances to the mast of inflation can either (a) discipline it control inflation, or (b) cause fiscal distress. Nominal debt can be a fiscal safety valve. It's not pretty, but it can in extreme cases be a way to reduce the real cost of excessive debt.
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Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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This statement is only true if government had a long-term perspective. Given the long-term in the House is two years, policy makers can pass the problem off (payback of the debt) to the next generation.
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David Hirshleifer |
USC | Bio/Vote History | ||
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Harrison Hong |
Columbia | Bio/Vote History | ||
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Not sure that there is any study on government commitments related to issuance of inflation protected products.
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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How about a list of all the countries that already issue indexed debt: Japan, US, Italy...
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Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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recent experience in the UK leaves this open to question
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Governments have many levers to tamper with the real payoff of debt (default, taxes, financial repression). Inflation is one of these levers. Inflation-indexed bonds reduce the ability to use this lever, but at the risk of the government simply using another lever more.
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Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Tobias Moskowitz |
Yale School of Management | Did Not Answer | Bio/Vote History | |
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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To some extent yes, but fiscally-challenged governments in world history have been inventive in overcoming legal and technical constraints. This may limit the commitment implicit in inflation-indexed bonds issuance.
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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History is replete with examples of countries that borrow and spend their way into crises despite the extreme costs of these crises to the people. And countries that pursue inflationary policies do so for more output in the short term not less debt in the long term.
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Bio/Vote History | ||
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Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Monetary policy is the remit of the Fed, not the Treasury. Price stability is important for many reasons, including keeping the debt service cost manageable. The Treasury's debt management office minimizes the cost of debt issuance; their strategy should include real bonds.
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Ingrid M. Werner |
OSU Fisher School | Did Not Answer | Bio/Vote History | |
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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