Inflation dynamics: The role of public debt and policy regimes

Saroj Bhattarai, Jae Won Lee and Woong Yong Park

Journal of Monetary Economics, 2014, vol. 67, issue C, 93-108

Abstract: In a passive monetary and active fiscal policy regime, changes in the value of public debt generate wealth effects on households. Then, in contrast to the active monetary and passive fiscal policy regime, inflation moves oppositely from the inflation target and a stronger reaction of interest rates to inflation increases the response of inflation to shocks. Moreover, a higher level of public debt increases the response of inflation while a weaker reaction of taxes to debt decreases the response of inflation to shocks. In a passive monetary and passive fiscal policy regime, both monetary and fiscal policy parameters affect inflation.

Keywords: Inflation target; Inflation response; Public debt; Monetary and fiscal policy regimes; Monetary and fiscal policy stances (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (24)

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Related works:
Working Paper: Inflation Dynamics: The Role of Public Debt and Policy Regimes (2013)
Working Paper: Inflation Dynamics: The Role of Public Debt and Policy Regimes (2013)
Working Paper: Inflation dynamics: the role of public debt and policy regimes (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:67:y:2014:i:c:p:93-108

DOI: 10.1016/j.jmoneco.2014.07.004

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