The Fiscal Consequences of Missing an Inflation Target

Michele Andreolli and Helene Rey

No 30819, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The European Central Bank is unique in setting monetary policy for several sovereign states with heterogeneous debt levels and different maturity structures. The monetary-fiscal nexus is central to the functioning of the euro area. We focus on one particular aspect of that nexus, the effect the reliability of the European Central Bank's monetary policy on public finances. We show that when the ECB misses its inflation target this has large heterogeneous fiscal consequences for Euro Area countries. For comparison we also estimate the fiscal consequences of the Federal Reserve and the Bank of England missing their inflation targets. They are also sizeable.

JEL-codes: E31 E44 E52 E60 F45 H63 (search for similar items in EconPapers)
Date: 2023-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mon and nep-opm
Note: AP IFM ME PE
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Published as Michele Andreolli & Hélène Rey, 2024. "Fiscal Consequences of Missing an Inflation Target," IMF Economic Review, vol 72(2), pages 701-772.

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Related works:
Journal Article: Fiscal Consequences of Missing an Inflation Target (2024)
Working Paper: The Fiscal Consequences of Missing an Inflation Target (2023)
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