Inflation and Public Debt Reversals in Advanced Economies

Ichiro Fukunaga, Takuji Komatsuzaki and Hideaki Matsuoka

No 2019/297, IMF Working Papers from International Monetary Fund

Abstract: This paper quantitatively assesses the effects of inflation shocks on the public debt-to-GDP ratio in 19 advanced economies using simulation and estimation approaches. The simulations based on the debt dynamics equation and estimations of impulse responses by local projections both suggest that a 1 percentage point shock to inflation rate reduces the debt-to-GDP ratio by about 0.5 to 1 percentage points. The results also suggest that the impact is larger and more persistent when the debt maturity is longer, but the difference from the benchmark case is not significant. These results imply that modestly higher inflation, even if accompanied by some financial repression, could reduce public debt burden only marginally in many advanced economies.

Keywords: WP; inflation shock; Inflation; public debt; financial repression; advanced economies; deflation shock; rollover ratio; inflation expectation; debt maturity; Debt reduction; Long term interest rates; Deflation; Global (search for similar items in EconPapers)
Pages: 23
Date: 2019-12-27
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=48855 (application/pdf)

Related works:
Journal Article: Inflation and public debt reversals in advanced economies (2022)
Working Paper: Inflation and Public Debt Reversals in Advanced Economies (2020)
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:imf:imfwpa:2019/297

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().