Is high debt constraining monetary policy? Evidence from inflation expectations

Luis Brandao-Marques, Marco Casiraghi, R. Gaston Gelos (), Olamide Harrison and Gunes Kamber
Authors registered in the RePEc Author Service: Luis Brandao Marques

No 1141, BIS Working Papers from Bank for International Settlements

Abstract: This paper examines whether high public debt levels pose a challenge to containing inflation. It does so by assessing the impact of public debt surprises on inflation expectations in advanced and Emerging Market Economies. It finds that debt surprises raise long-term inflation expectations in Emerging Market Economies in a persistent way, but not in advanced economies. The effects are stronger when initial debt levels are already high, when inflation levels are initially high, and when debt dollarization is significant. By contrast, debt surprises have only modest effects in countries with inflation targeting regimes. Increased debt levels may complicate the fight against inflation in Emerging Market Economies with high and dollarized debt levels, and weaker monetary policy frameworks.

Keywords: inflation expectations; monetary policy; fiscal dominance; debt (search for similar items in EconPapers)
JEL-codes: E31 E41 E52 E62 (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-ifn, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Is high debt Constraining monetary policy? evidence from inflation expectations (2024)
Working Paper: Is High Debt Constraining Monetary Policy? Evidence from Inflation Expectations (2023)
Working Paper: Is High Debt Constraining Monetary Policy? Evidence from Inflation Expectations (2023)
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