High public debt in the Americas: non-linear implications for risk premia and inflation expectations

Eduardo Amaral, Rafael Guerra, Alejandrina Salcedo, Pablo Tomasini and Christian Upper

No 133, BIS Bulletins from Bank for International Settlements

Abstract: Public debt has reached multi-decade highs in the Americas. Additionally, public interest costs have generally increased over the past decade. High public debt and interest costs increase the sensitivity of risk premia to fiscal deficits – regardless of the exchange rate regime – and amplify the sensitivity of short-term inflation expectations to fluctuations in risk premia.Our analysis underscores the relevance of disciplined fiscal policies, which assume heightened significance in the context of current debt dynamics. On the monetary side, safeguarding central bank independence is crucial for ensuring macroeconomic stability.

Pages: 8 pages
Date: 2026-08-19
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