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Indexing Brazilian Style: Inflation without Tears?


IN EARLY 1974 the business and popular press let scarcely a week go by without some reference to the possibility of indexing bonds, savings accounts, and even contracts, to the price level. In this way, some argue, the corrosive symptoms of inflation can at least be neutralized, even if the malady itself cannot be cured. The basic principle is not new. The search for an immutable standard traces back at least to Jevons; and Irving Fisher apparently succeeded in persuading an American firm to issue an indexed bond in 1925. More recently, in the 1950s, Finland, France, and Israel, among other countries, have resorted to such practices for governmental obligations and savings accounts; and Latin American countries have experimented with deposit accounts denominated in dollars, as well as with adjustable exchange rates.


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