Futures Markets and the Fluctuations in Inflation, Monetary Growth, and Asset Returns

Inflation and nominal interest rates have been volatile in recent years. Futures contracts in price indices would help in this environment by enhancing information about prices and by providing a convenient means for people to hedge against inflation. There is some evidence that the availability of these instruments would encourage investment and reduce the mean real rate of return on long-term bonds. Indexed bonds--which are now significant in Britain--serve a similar purpose. IN the absence of such bonds, there would be a market for price-index futures, although the volume of trading would probably be modest.