Škarnulis, Andrius; Kolisovas, Danielius
February 2015
Monetary Studies (Bank of Lithuania);Feb2015, Vol. 17-19 Issue 1, p56
Academic Journal
The paper presents a concise overview of the main pros and cons of sovereign inflation-linked bonds that evolved in the literature and were recognised since the origin of these securities. To the best of our knowledge this paper is the first attempt to start discussions in the literature on the introduction of sovereign inflation-linked bonds in Lithuania. Considering the practical and theoretical aspects, as well as experience of other countries, we believe that the benefits of inflation-linked bonds offset potential drawbacks and conclude that even a small part of indexed bonds in the overall sovereign bond market in Lithuania would be beneficial for the issuer and could also contribute to more effective pension accumulation and annuities system, if introduced stepwise and consistently. However, an in-depth quantitative analysis and modelling of potential benefits, risks and influence is needed, which constitutes the area for future research.


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