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Working Paper

Indexed Debt Contracts and the Financial Accelerator

This paper addresses the positive and normative implications of indexing risky debt to observable aggregate conditions. These issues are pursued within the context of the celebrated financial accelerator model of Bernanke, Gertler, and Gilchrist (1999). The principal conclusions are that the optimal degree of indexation is significant, and that the business cycle properties of the model are altered under this level of indexation.

Suggested Citation

Carlstrom, Charles T., Timothy S. Fuerst, and Matthius Paustian. 2011. “Indexed Debt Contracts and the Financial Accelerator.” Federal Reserve Bank of Cleveland, Working Paper No. 11-17. https://doi.org/10.26509/frbc-wp-201117