Inflating away the public debt? An empirical assessment

Jens Hilscher, Alon Raviv and Ricardo Reis

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper proposes a new method for measuring the impact of inflation on the real value of public debt. The distribution of debt debasement is based on two inputs: the distribution of privately held nominal debt by maturity, for which we provide new estimates, and the distribution of risk-adjusted inflation dynamics, for which we provide a novel copula estimator using options data. We find that inflation by itself is unlikely to lower the U.S. fiscal burden significantly because debt is concentrated at short maturities and perceived inflation shocks have little short-run persistence and are small.

Keywords: inflation; debt debasement; value at risk; inflation derivatives; debt maturity structure; financial repression (search for similar items in EconPapers)
JEL-codes: E31 E64 G12 G18 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-03-01
New Economics Papers: this item is included in nep-cfn, nep-cwa, nep-isf and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published in Review of Financial Studies, 1, March, 2022, 35(3), pp. 1553 - 1595. ISSN: 0893-9454

Downloads: (external link)
http://eprints.lse.ac.uk/107543/ Open access version. (application/pdf)

Related works:
Journal Article: Inflating Away the Public Debt? An Empirical Assessment (2022)
Working Paper: Inflating Away the Public Debt? An Empirical Assessment (2014)
Working Paper: Inflating Away the Public Debt? An Empirical Assessment (2014)
Working Paper: Inflating Away the Public Debt? An Empirical Assessment (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:107543

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