Public Debt and Changing Inflation Targets

Michael Krause and Stéphane Moyen

American Economic Journal: Macroeconomics, 2016, vol. 8, issue 4, 142-76

Abstract: What are the effects of a higher central bank inflation target on the burden of real public debt? Several recent proposals have suggested that even a moderate increase in the inflation target can have a pronounced effect on real public debt. We consider this question in a New Keynesian model with a maturity structure of public debt and an imperfectly observed inflation target. We find that moderate changes in the inflation target only have significant effects on real public debt if they are essentially permanent. Moreover, the additional benefits of not communicating a change in the inflation target are minor.

JEL-codes: E12 E31 E52 H63 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/mac.20130014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/mac.20130014 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... uiftK2ho5kAxUyY4YOa4 (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... R5V_XdHMXV4_48UIfXqg (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Public debt and changing inflation targets (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:8:y:2016:i:4:p:142-76

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().