<p>The article you linked is correct, inflation premium is the extra return people get as a compensation for taking the inflation risk.</p>
<p>However, inflation does benefit borrowers but this is not called <em>inflation premium</em>. Perhaps the book you read was mistranslated, or author made an error, unless you share the reference it is hard to say.</p>

CC BY-SA 4.0
2021-09-08T06:50:33.860Z
[link] https://books.google.co.in/books?id=bmovDwAAQBAJ&pg=PT245&lpg=PT245&dq=Ramesh+Singh+google+books+the+bonus+brought+by+inflation+to+the+borrower+is+known+as+the+inflation+premium&source=bl&ots=f6-0Vq8r5A&sig=ACfU3U1trCso_NykpuKZm4cNfyYfUjwkPQ&hl=en&sa=X&ved=2ahUKEwjkvK6J3e7yAhUb7XMBHYufB8wQ6AF6BAgMEAM#v=onepage&q=Ramesh%20Singh%20google%20books%20the%20bonus%20brought%20by%20inflation%20to%20the%20borrower%20is%20known%20as%20the%20inflation%20premium&f=false) - This is the link to the book I'm referring to.
Sasikuttan
CC BY-SA 4.0
2021-09-08T06:51:33.417Z
Check the 1st paragraph under the topic 'inflation premium'.
Sasikuttan
CC BY-SA 4.0
2021-09-10T16:07:09.383Z
@Curiouserandcuriouser well the book is simply wrong, I mean this is not some sort of top tier economics textbook, its from unknown economist, and these sort of off brand textbooks are typically of lower quality
1muflon1
CC BY-SA 4.0
2021-09-11T17:28:13.640Z
Yeah, figured it out. Even had an argument with the author, although he never conceded his mistake. Thanks, anyway!
Sasikuttan
CC BY-SA 4.0
2021-09-08T06:04:46.723Z
2021-09-08T06:04:46.723Z
1muflon1
<p><a href="https://financial-dictionary.thefreedictionary.com/inflation+premium" rel="nofollow noreferrer">'Inflation premium'</a> is defined here as the higher return that <strong>investors</strong> demand in exchange for investing in a long-term security, where inflation has a greater potential to reduce the real return.</p>
<p>In another book, I saw inflation premium being defined as the bonus brought by inflation to the <strong>borrowers</strong>.</p>
<p>Both these ideas are contradicting, as the first one implies inflation premium is a compensation for investors, while the second one claims it is a compensation for borrowers, considering the rise in price levels.</p>
<p>Which one is correct?</p>

<inflation><interest-rate><investment><definition>
Confusion regarding the definition of inflation premium
Sasikuttan
# Confusion regarding the definition of inflation premium

(Asked by: username_0 on 2021-09-08)

['Inflation premium'](https://financial-dictionary.thefreedictionary.com/inflation+premium) is defined here as the higher return that **investors** demand in exchange for investing in a long-term security, where inflation has a greater potential to reduce the real return.

In another book, I saw inflation premium being defined as the bonus brought by inflation to the **borrowers**.

Both these ideas are contradicting, as the first one implies inflation premium is a compensation for investors, while the second one claims it is a compensation for borrowers, considering the rise in price levels.

Which one is correct?

**Tags:** inflation, interest-rate, investment, definition

---

## 1 answers

### Answer by username_1 on 2021-09-08. Score: 1 | Accepted answer

The article you linked is correct, inflation premium is the extra return people get as a compensation for taking the inflation risk.

However, inflation does benefit borrowers but this is not called *inflation premium*. Perhaps the book you read was mistranslated, or author made an error, unless you share the reference it is hard to say.

> **Comments:**
> **username_0**: [link] https://books.google.co.in/books?id=bmovDwAAQBAJ&pg=PT245&lpg=PT245&dq=Ramesh+Singh+google+books+the+bonus+brought+by+inflation+to+the+borrower+is+known+as+the+inflation+premium&source=bl&ots=f6-0Vq8r5A&sig=ACfU3U1trCso_NykpuKZm4cNfyYfUjwkPQ&hl=en&sa=X&ved=2ahUKEwjkvK6J3e7yAhUb7XMBHYufB8wQ6AF6BAgMEAM#v=onepage&q=Ramesh%20Singh%20google%20books%20the%20bonus%20brought%20by%20inflation%20to%20the%20borrower%20is%20known%20as%20the%20inflation%20premium&f=false) - This is the link to the book I'm referring to.  
> **username_0**: Check the 1st paragraph under the topic 'inflation premium'.  
> **username_1**: @Curiouserandcuriouser well the book is simply wrong, I mean this is not some sort of top tier economics textbook, its from unknown economist, and these sort of off brand textbooks are typically of lower quality  
> **username_0**: Yeah, figured it out. Even had an argument with the author, although he never conceded his mistake. Thanks, anyway!  

---

