Thus, inflation indexation is often applied to pension payments, rents and other situations which are not subject to regular re-pricing in the market.
Using CPI as a COLA salary adjustment for taxable income fails to recognize that increases are generally taxed at the highest marginal tax rate whereas an individual's rising costs are paid with after-tax dollars - dollars commensurate with an individual's average after-tax level.
Indexing tax brackets does not address this fundamental issue but it does effectively eliminate "bracket-creep".
Both the UK and the US have issued inflation indexed government bonds to reduce their borrowing costs.
Robert Shiller has done extensive research on all mentioned aspects of government bond indexation.
As a result, a rising share of the taxpayers’ population is anticipated to become liable under the AMT which was originally implemented to tax only the very rich.
(On January 2, 2013, President Barack Obama signed the American Taxpayer Relief Act of 2012, which indexes to inflation the income thresholds for being subject to the tax.
Often the pegging conducted by central banks is pretty discrete and not disclosed in any formal policy statement.
A central bank will maintain an exchange rate within a deemed acceptable range instead of at a specific level.
Over time, the acceptable range may broaden or narrow depending on such a country's economy overall reliance on exports to fuel growth.