Journal Article
Do local bond markets help fight inflation?
Abstract: Domestic bond markets allow governments to inflate away their debt obligations. However, they also may create a group of bond holders with the influence and desire to demand lower stable inflation. These competing interests suggest the net impact of creating a local currency bond market on inflation is ambiguous. Recent research finds that the creation of such markets in countries with an inflation target does reduce inflation: Countries with bond markets experience inflation approximately 3 percentage points lower than those without.
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Provider: Federal Reserve Bank of San Francisco
Part of Series: FRBSF Economic Letter
Publication Date: 2016
Order Number: 10