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Faculty of Economics

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Faraglia, E., Marcet, A., Oikonomou, R. and Scott, A.

The impact of debt levels and debt maturity on inflation

The Economic Journal

Abstract: We examine the implications for optimal inflation of changes in the level and maturity of government debt under the assumption where fiscal and monetary policies co-ordinate, and in the case of an independent central bank following a Taylor rule. Under co-ordination, inflation persistence and volatility depend on the sign, size and maturity of debt. Higher debt leads to higher inflation and longer maturity leads to more persistent inflation although inflation plays a minor role in achieving fiscal sustainability. Under an independent monetary authority, inflation is higher, more volatile and more persistent and plays a significant role in achieving fiscal solvency.

Publisher's Link: http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12015/abstract



Papers and Publications



Recent Publications


Onatski, A. and Wang, C. Alternative Asymptotics for Cointegration Tests in Large VARs Econometrica, forthcoming [2018]

Elliott, M. and Golub, B. A network approach to public goods accepted, Journal of Political Economy [2018]

Faraglia, E., Marcet, A., Oikonomou, R. and Scott, A. Government Debt management: the Short and the Long of it Review of Economic Studies, accepted [2018]