Inflation dynamics: The role of public debt and policy regimes

Saroj Bhattarai; Jae Won Lee; Woong Yong Park

doi:10.1016/j.jmoneco.2014.07.004

Inflation dynamics: The role of public debt and policy regimes

Saroj Bhattarai, Jae Won Lee, Woong Yong Park

Economics

Research output: Contribution to journal › Article › peer-review

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.

Original language	English (US)
Pages (from-to)	93-108
Number of pages	16
Journal	Journal of Monetary Economics
Volume	67
DOIs	https://doi.org/10.1016/j.jmoneco.2014.07.004
State	Published - Oct 1 2014

Keywords

Inflation response
Inflation target
Monetary and fiscal policy regimes
Monetary and fiscal policy stances
Public debt

ASJC Scopus subject areas

Finance
Economics and Econometrics

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Inflation dynamics: The role of public debt and policy regimes

Abstract

Keywords

ASJC Scopus subject areas

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