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Why Investors Prefer Nominal Bonds: a Hypothesis

Coleman, William


The paper advances an answer to a puzzle: Why is any lending or borrowing done in terms of money, when such money debt exposes the lenders’ wealth to inflation risk? The ‘received’ answer to this question is that money bonds are just proxies for real bonds, proxies born of insufficient appreciation, or a benign neglect, of inflation risk. As mere ‘proxies’, this answer implies that money bonds are redundant: anything a money bond could do, a real bond could do. The thesis of the paper is that...[Show more]

CollectionsANU Centre for Economic Policy Research (CEPR)
Date published: 2007-05
Type: Working/Technical Paper
Access Rights: Open Access


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