Household Beliefs about Fiscal Dominance

Philippe Andrade, Erwan Gautier, Eric Mengus, Emanuel Moench and Tobias Schmidt

No 19862, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using a novel survey design, we provide direct micro-level evidence on whether households associate public debt with inflation in a manner consistent with models of fiscal dominance. Individuals who consider that fiscal resources are stretched tend to associate larger debt-to-GDP with higher inflation. By contrast, individuals who think there is more fiscal space do not make that connection. This result is robust to controlling for pessimism or expansionary effects of fiscal policy. In addition, households associate stretched fiscal resources with inflation because of negative supply developments rather than with the central bank keeping interest rates low to help the fiscal authority.

Keywords: Inflation; expectations (search for similar items in EconPapers)
JEL-codes: C83 D84 E31 E63 (search for similar items in EconPapers)
Date: 2025-01
New Economics Papers: this item is included in nep-mon
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Related works:
Working Paper: Household Beliefs about Fiscal Dominance (2025)
Working Paper: Household Beliefs about Fiscal Dominance (2025)
Working Paper: Household Beliefs about Fiscal Dominance (2025)
Working Paper: Household Beliefs about Fiscal Dominance (2025)
Working Paper: Household Beliefs about Fiscal Dominance (2025)
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