INFLATION AND DEBT INDEXATION: THE EQUIVALENCE OF TWO ALTERNATIVE SCHEMES FOR THE CASE OF PERIODIC PAYMENTS

ABSTRACT

The presence of inflation has induced the financial institutions to implement procedures devised to protect the real values of their loans. Two of such procedures, the floating rate scheme and the monetary correction mechanism, tend to lead to very different streams of payments. However, whenever the floating rate scheme follows the rule of strict adherence to the Fisher equation, the two procedures are financially equivalent.