Portfolio aspects of inflation -protection securities.

摘要

This dissertation examines design issues of inflation-indexed debt and the role that such securities play in investor portfolios and debt management decisions by governments. The reported yield on inflation-protection securities, like those issued by the U.S. Treasury since 1997, may not reveal the true real rate of return since the indexation procedure may not keep the real value of principal and interest payments unchanged. The procedure of indexing to the lagged momentum of the seasonally unadjusted CPI gives rise to three types of indexation bias that may change the expected real value of the future stream of payments relative to the current par value. These biases are due to price index seasonality, non-seasonal fluctuations in reported inflation rates, and any expected "permanent" changes in future inflation. These biases are capable of creating predictable real capital gains or losses with the indexation procedure actually in place.;The existence and magnitude of welfare gains to investors from the introduction of inflation-indexed bonds depends on the degree of heterogeneity of risk preferences and the volatility of inflation and exchange rates, which negatively impact real portfolio returns. Using data for recent issues of inflation-indexed government debt in the United States, Mexico, and Brazil, the welfare gains from introducing such instruments into optimal portfolios are calculated for each country. The largest gains are found for Brazil followed by Mexico and the United States.;Sovereign debt composition is important for the optimal setting of monetary and fiscal policy. Under the assumption of a closed economy with two types of debt, one-period nominal and one-period real coupon bonds, sovereign debt structures with mostly real debt increase the volatility of distortionary government policy relative to debt structures with high proportions of nominal debt. Nominal debt hedges the government budget constraint against adverse shocks and insulates the household against excess policy volatility. A predominantly nominal debt structure can reduce overall macroeconomic volatility and lead to increases in equilibrium output and consumption. Therefore, sovereign debt management strategies should strive to include nominal debt in sufficient quantities to minimize costs associated with the business cycle.