Dr. S.M. Hasanuz Zaman Explain Indexation
S J Tubrazy
About twenty-one countries of world have introduced indexation but the coverage of indexation is not similar in different countries. A large number of countries have indexed wages, pensions and social security payments. Some other countries have indexed a single bond while many countries have indexed different forms of investments. Brazil is the only country to adopt this practice comprehensively. It is because of these differences that the technique of indexation and the choice of index differ in different countries. The most common technique of indexation is linking wage or investment to consumer prices or cost of living. Some countries make advance adjustments with prices while most countries practice ex post facto adjustments. The period of adjustment ranges from one month to one year; in some cases even three years.
The merits attributed to indexation are generally theoretical. As against it the contestants of this approach have based their arguments partly on theory and largely on the basis of experience gained in different countries of the world.Indexation would mean that someone has to compensate the sufferer for the damage caused to the purchasing power of money or for decrease in its-value. It may be payable by the Government, the employer, the borrower or the banker.