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Inflation Indexation in Public Finances: A Global Dataset on Current Practices

Vybhavi Balasundharam, Arika Kayastha and Marcos Poplawski Ribeiro
Authors registered in the RePEc Author Service: Marcos Poplawski-Ribeiro

No 2023/264, IMF Working Papers from International Monetary Fund

Abstract: This paper presents a new global dataset on current practices for four budget items in terms of indexation to the price level and other nominal variables. Compiling data from documents of select multilateral organizations, governments, and related literature as well as conducting a survey among IMF country desks of 190 country-members, we show how indexation is internationally applied in (i) personal income tax brackets; (ii) pensions; (iii) social assistance programs; and (iv) public wages. The dataset shows that while indexation policies vary significantly across economies, some trends can be identified. For example, indexation is more common on pension and social grants than on taxes, and falls with the degree of economic development. We further discuss some applications of this new dataset. Those include an accounting exercise illustrating the impacts of indexation on fiscal outcomes during episodes of inflation surprises; and an analysis of the association between the overall degree of indexation combining the four budget items and inflation persistence.

Keywords: Indexation; Inflation; Fiscal Policy; Fiscal Insititutions; inflation Indexation; indexation policy; price level; IMF country desk; impacts of indexation; indexation practice; Social assistance spending; Pensions; Pension spending; Wages; Africa; Global; Europe; Sub-Saharan Africa; Asia and Pacific (search for similar items in EconPapers)
Pages: 43
Date: 2023-12-22
New Economics Papers: this item is included in nep-acc
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