Public debt and household inflation expectations

Francesco Grigoli and Damiano Sandri

Journal of International Economics, 2024, vol. 152, issue C

Abstract: We use randomized controlled trials in the US, UK, and Brazil to examine the causal effect of public debt news on household inflation expectations. People tend to underestimate public debt levels and increase inflation expectations when informed about the correct levels. The extent of the revisions is proportional to the size of the information surprise. Confidence in the central bank considerably reduces the sensitivity of inflation expectations to public debt, while confidence in fiscal authorities plays a more limited role. We also show that people associate high public debt with stagflationary effects but not with a greater risk of monetary finance.

Keywords: Public debt; Inflation expectations; Monetary finance; Fiscal dominance (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:152:y:2024:i:c:s0022199624001302

DOI: 10.1016/j.jinteco.2024.104003

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