## 2025. The Impact of Fiscal Policy on Inflation Expectations. IMF Working Papers WP/25/231.

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---

### Introduction and motivation
- Inflation has eased from post-pandemic peaks but remains persistently high in many economies; services-sector prices continue to rise at rates well above pre-pandemic norms.
- Fiscal pressures have intensified due to demographic trends, pandemic-era surge in deficit spending, geopolitical tensions, commodity price volatility, and increased spending on social protection and defense.
- High interest rates used by central banks to rein in inflation have raised debt servicing costs, complicating fiscal management.
- Motivation:
  - Need for empirical estimates of interactions between fiscal and monetary policies to design coherent frameworks that consider implications for both inflation control and fiscal sustainability.
  - Focus on the effect of fiscal policy on inflation expectations within the dominant inflation targeting framework, where inflation expectations are central to monetary decision-making.

### Theoretical channels linking fiscal policy to inflation expectations
- Fiscal dominance:
  - Central bank accommodation of government financing needs can lead to higher inflation.
  - Tighter monetary policy without accommodation can raise borrowing costs and potentially trigger a debt crisis and subdued output.
  - Perceptions of fiscal unsustainability can raise inflation expectations.
- Fiscal Theory of the Price Level (FTPL):
  - Aggregate price level determined by the present value of future government budget balances.
  - If the real value of government liabilities exceeds expected future surpluses, inflation may be required to restore equilibrium.
  - Agents internalizing these dynamics adjust inflation expectations accordingly.
- New Keynesian (nominal rigidities) channel:
  - Fiscal expansions (increased government spending or tax cuts) boost aggregate demand and, given supply constraints, can exert upward pressure on prices and inflation expectations.
- Financial/credit channel:
  - Fiscal consolidation may reduce government borrowing, freeing up credit and lowering private-sector borrowing costs, dampening inflationary pressures.
  - Fiscal expansion may crowd out private borrowing, raise financing costs, and contribute to higher inflation and inflation expectations.
- Direct price-level effects of fiscal instruments:
  - VAT hikes, increased corporate taxes, or reductions in energy subsidies can directly raise consumer prices or induce firms to pass on higher costs, leading to short-term inflation spikes.

### Empirical strategy and identification of fiscal shocks
- Two quantitative approaches to identify fiscal shocks:
  1. Changes in the primary balance:
     - Large fiscal consolidations defined as an annual improvement in the primary balance of more than 1 percent of GDP and 1.5 percent of GDP (these correspond to the 75th and 80th percent of the distribution of changes in the primary balance).
     - Large fiscal expansions defined as a deterioration of the primary balance by more than 1 percent of GDP and 1.5 percent of GDP over 2000-2023.
     - Use of cyclically-adjusted primary balance changes to account for cyclical factors and commodity-price effects.
     - Exclusion rule: for consolidation episodes with a 1 percent of GDP threshold, exclude any episode for which a fiscal consolidation greater than 1 percent of GDP was already expected in the World Economic Outlook forecasts published in October of the previous year.
  2. Changes in public debt levels:
     - Large shocks to debt levels identified as changes larger than 3 percent of GDP and 4 percent of GDP (these correspond to the 75th and 80th percent of the distribution of changes in the debt-to-GDP ratios).
     - Rationale: captures broader fiscal-position changes including shocks to borrowing costs, stock-flow adjustments, and below-the-line financing operations; higher-than-expected debt levels may affect perceptions of fiscal sustainability and inflation expectations even without primary balance changes.
- Narrative approach:
  - Use of Carriere-Swallow and others (2020) database to identify fiscal consolidation episodes based on policy documents motivated by intent to reduce the budget deficit rather than cyclical conditions.
  - Strengths: excludes passive fiscal-position changes driven by exchange rates, commodity prices, or demand shifts.
  - Limitations: covers only fiscal contractions (not expansions) and is available for a reduced sample: Latin American countries over 1986-2020.
- Focus on unanticipated changes:
  - Aim to estimate impacts of unanticipated fiscal policy changes by excluding episodes fully expected by professional forecasters.

### Data, sample, and empirical method
- Inflation expectations:
  - Data source: Consensus Forecast.
  - Sample period: 2000-2023.
  - Coverage: a large sample of advanced and emerging market economies.
- Macroeconomic indicators:
  - Source: World Economic Outlook (WEO) database.
  - Variables used include government primary balance, real GDP growth, output gap, and inflation.
- Sample: 35 advanced economies (AEs) and 17 major emerging markets (EMs).
- Estimation method: Local projection approach (Jorda (2005)) with specification:
  - 휋ᵢₜ₊ₕᵉ = 훼ₕ 휋ᵢₜ₋₁ᵉ + [Iₑₘ βₑₘₕ + (1−Iₑₘ) βₐₑₕ] FiscalShockᵢₜ + γₕ Xᵢₜ + λₜₕ + μᵢₕ + εᵢₜₕ
- Controls (Xᵢₜ): contemporaneous and lagged values of the output gap, inflation, the fiscal primary balance; country and time fixed effects.
- Iₑₘ: indicator for EMs; permits differential coefficients βₐₑₕ (AEs) and βₑₘₕ (EMs).

### Main empirical findings
- Large changes in the primary balance (larger than 1.5 percent of GDP):
  - Associated with a statistically significant change in 2-year ahead inflation expectations over a 3-year period in EMs.
  - A 1 percentage point primary balance contraction is associated with a 0.2 percentage points decline in inflation expectations.
- Advanced economies (AEs):
  - No statistically significant impact of fiscal policy shocks on 2-year ahead inflation expectations.
  - Possible reasons: stronger monetary policy frameworks keeping expectations anchored; less exposure to negative feedback loops from dollar-denominated debt and exchange rate depreciation.
- Robustness:
  - Results using changes in the primary balance are robust to identifying fiscal shocks as changes in the cyclically-adjusted primary balance, with similar magnitudes.
  - Narrative-identified fiscal consolidation episodes produce larger estimated impacts: a 1 percentage point fiscal consolidation is associated with a cumulative 1 percentage points decline in 2-year ahead inflation expectations over a 3-year horizon.
- Fiscal composition:
  - Expenditure-based fiscal consolidations have an even larger impact on inflation expectations than overall consolidations.
  - Tax-based fiscal consolidations do not have a statistically significant impact on inflation expectations.

### Debt dynamics and inflation expectations
- Large shifts in debt-to-GDP:
  - Declines in debt ratios larger than 3 percent of GDP and 4 percent of GDP are associated with a reduction in inflation expectations of about 0.1 percentage points in EMs.
  - Increases in debt-to-GDP ratios are associated with higher inflation expectations.
- State-dependent findings for EMs:
  - Fiscal consolidations produce larger reductions in inflation expectations when:
    - Inflation is high (when inflation is in the highest 90th percentile): a 1 percentage point of GDP fiscal consolidation is associated with a reduction of about 0.5 percentage points in 2-year ahead inflation expectations.
    - Debt-to-GDP ratios are high (highest 10 percent of the distribution): a 1 percentage point of GDP fiscal consolidation is associated with a reduction of about 0.7 percentage points in 2-year ahead inflation expectations.
  - Fiscal expansions show an upwards-sloping impact across inflation and public debt distributions: larger increases in inflation expectations when inflation is high and public debt is elevated.
- Sovereign risk interaction:
  - Increases in debt-to-GDP ratios are associated with larger increases in inflation expectations at higher levels of sovereign spreads (EMBI), consistent with greater concerns about fiscal dominance when fiscal positions are weak.
  - The impact of debt shocks on inflation expectations is higher in inflationary environments.

### Institutions, exchange rate regimes, and state dependence
- Institutional factors shaping the fiscal–inflation expectations link:
  - Independent central banks with price stability mandates can minimize the impact of fiscal policy on inflation and expectations.
  - The presence of fiscal councils or responsibility laws can reduce perceived probabilities of fiscal dominance and weaken the impact of fiscal actions on inflation expectations.
  - Countercyclical fiscal policy reduces the impact of fiscal policy on inflation expectations.
- Fiscal space:
  - Ample fiscal space reduces the short-run impact of revenue or expenditure changes on sovereign default likelihood and fiscal dominance; fiscal expansions in such contexts may not affect inflation expectations.
  - Limited fiscal space increases the risk of a vicious circle of sovereign risk and inflation.
- State-dependent estimates (EMs):
  - Fiscal consolidations have a larger impact on inflation expectations in high-inflation environments and when debt-to-GDP is high.
  - Fiscal consolidations have a larger impact under fixed or less flexible exchange rate regimes than under fully flexible exchange rate frameworks.
  - Fiscal policy has a larger impact on inflation expectations when central bank independence is weak.

### Policy recommendations and implications
- Ensure fiscal adjustments are properly calibrated, taking into account:
  - the institutional framework;
  - the economic juncture; and
  - potential interactions with other macroeconomic policies (notably monetary policy and exchange rate management).
- Design fiscal policy to reduce spillovers on inflation and to support the anchoring of inflation expectations.
- Pursue fiscal consolidations in ways that help reduce inflationary pressures and inflation expectations.
- Build and maintain robust fiscal policy frameworks and prudent fiscal balances to create policy space for responding to shocks.
- For emerging economies:
  - Emphasize prudent fiscal policy to mitigate vulnerabilities from dependence on foreign savings, exchange rate pressures, sovereign risk, and inflation expectations dynamics.

### Supporting empirical evidence and key statistics
- Unconditional probabilities:
  - Unexpected fiscal consolidation greater than 1.5 percent of GDP: 7.2 percent for AEs and 7.8 percent in EMs.
  - Fiscal expansion greater than 1.5 percent of GDP: 13.0 percent for AEs and 13.4 percent in EMs.
- Selected summary statistics on inflation and inflation expectations:
  - Advanced economies (AEs): Inflation — N 806.0; Mean 2.5; SD 2.2; Min -0.3; p25 1.1; Median 2.1; p75 3.2; Max 17.2.
  - Major EMs: Inflation — N 371.0; Mean 5.0; SD 3.3; Min -0.3; p25 2.8; Median 4.2; p75 6.5; Max 18.7.
  - Others: Inflation — N 2694.0; Mean 5.5; SD 4.2; Min -0.3; p25 2.2; Median 4.5; p75 7.8; Max 18.7.
  - 1-year Ahead Inflation Expectations (AEs) — N 661.0; Mean 2.3; SD 1.1; Min 1.0; p25 1.6; Median 2.0; p75 2.7; Max 9.7.
- Summary statistics: fiscal shocks (percent of GDP, selected):
  - AEs: Change in primary balance — N 660.0; Mean 0.1; SD 1.5; Min -4.2; p25 -0.7; Median 0.2; p75 1.0; Max 3.5.
  - Major EMs: Change in primary balance — N 357.0; Mean -0.0; SD 1.3; Min -4.2; p25 -0.9; Median 0.1; p75 0.8; Max 3.2.
  - Others: Change in primary balance — N 2183.0; Mean -0.0; SD 1.7; Min -4.2; p25 -1.1; Median -0.0; p75 1.1; Max 3.6.
  - AEs: Change in public debt — N 690.0; Mean 0.2; SD 3.7; Min -10.0; p25 -2.1; Median -0.3; p75 2.3; Max 11.7.
  - Major EMs: Change in public debt — N 372.0; Mean 0.3; SD 3.6; Min -10.1; p25 -1.8; Median 0.1; p75 2.3; Max 11.5.
- Summary statistics: controls (selected):
  - AEs: Output gap (% potential GDP) — N 864.0; Mean -0.5; SD 2.9; Min -18.3; p25 -1.6; Median -0.2; p75 1.0; Max 13.4.
  - AEs: Public Debt (% GDP) — N 776.0; Mean 58.6; SD 29.0; Min 9.6; p25 36.5; Median 53.4; p75 79.6; Max 129.0.
  - Major EMs: Public Debt (% GDP) — N 400.0; Mean 44.0; SD 17.9; Min 9.8; p25 31.7; Median 41.3; p75 55.3; Max 96.0.
  - Others: Primary Balance (%GDP) — N 2730.0; Mean -0.7; SD 3.0; Min -7.5; p25 -2.6; Median -0.9; p75 1.0; Max 8.3.
- Notes on empirical figures:
  - Impulse responses reported as cumulative responses over a 3-year period following a 1-percent-of-GDP shock.
  - Confidence indicators: Bars in figures show 1 standard deviations or the 90th percentile as noted in the annex figure captions.
  - Shock thresholds: Consolidation or expansion shocks 2 use a threshold of 1 percent of GDP; shocks 3 use a threshold of 1.5 percent of GDP.

*Source: IMF Working Papers WP/25/231 — The Impact of Fiscal Policy on Inflation Expectations (wpiea2025231-source-pdf).*

### 2025. The Impact of Fiscal Policy on Inflation Expectations. IMF Working Papers WP/25/231.

### The Impact of Fiscal Policy on Inflation Expectations (IMF Working Papers WP/25/231)

### Introduction
- Context:
  - Inflation has eased from post-pandemic peaks but remains persistently high in many economies; services-sector prices continue to rise at rates well above pre-pandemic norms.
  - Fiscal pressures have intensified due to demographic trends raising healthcare and pension costs, pandemic-era surge in deficit spending, geopolitical tensions, commodity price volatility, and increased spending on social protection and defense.
  - High interest rates used by central banks to rein in inflation have raised debt servicing costs, complicating fiscal management.
- Motivation:
  - Need for empirical estimates of interactions between fiscal and monetary policies to design coherent frameworks that consider implications for both inflation control and fiscal sustainability.
  - Focus on the effect of fiscal policy on inflation expectations within the dominant inflation targeting framework, where inflation expectations are central to monetary decision-making.

### Theoretical channels linking fiscal policy to inflation expectations
- Fiscal dominance:
  - Central bank may accommodate government financing needs or debt sustainability concerns, leading to higher inflation (Sargent and Wallace, 1981).
  - Without accommodation, tighter monetary policy can raise borrowing costs and potentially trigger a debt crisis and subdued output (Aiyagari and Gertler, 1985; Calvo, 1988).
  - Perceptions of fiscal unsustainability can raise inflation expectations.
- Fiscal Theory of the Price Level (FTPL):
  - Aggregate price level determined by the present value of future government budget balances (Woodford, 1994; Cochrane, 2005; Benigno, 2020).
  - If the real value of government liabilities exceeds expected future surpluses, inflation may be required to restore equilibrium (Cochrane, 2023).
  - Agents internalizing these dynamics adjust inflation expectations accordingly.
- New Keynesian (nominal rigidities) channel:
  - Fiscal expansions (increased government spending or tax cuts) boost aggregate demand and, given supply constraints, can exert upward pressure on prices and inflation expectations.
- Financial/credit channel:
  - Fiscal consolidation may reduce government borrowing, freeing up credit and lowering private-sector borrowing costs, dampening inflationary pressures.
  - Fiscal expansion may crowd out private borrowing, raise financing costs, and contribute to higher inflation and inflation expectations.
- Direct price-level effects of fiscal instruments:
  - VAT hikes, increased corporate taxes, or reductions in energy subsidies can directly raise consumer prices or induce firms to pass on higher costs, leading to short-term inflation spikes.

### Empirical strategy and identification of fiscal shocks
- Two quantitative approaches to identify fiscal shocks:
  1. Changes in the primary balance:
     - Large fiscal consolidations defined as an annual improvement in the primary balance of more than 1 percent of GDP and 1.5 percent of GDP (these correspond to the 75th and 80th percent of the distribution of changes in the primary balance).
     - Large fiscal expansions defined as a deterioration of the primary balance by more than 1 percent of GDP and 1.5 percent of GDP over 2000-2023.
     - Use of cyclically-adjusted primary balance changes to account for cyclical factors and commodity-price effects.
     - Exclusion rule to focus on unanticipated policy-driven changes: for consolidation episodes with a 1 percent of GDP threshold, exclude any episode for which a fiscal consolidation greater than 1 percent of GDP was already expected in the World Economic Outlook forecasts published in October of the previous year.
  2. Changes in public debt levels:
     - Large shocks to debt levels identified as changes larger than 3 percent of GDP and 4 percent of GDP (these correspond to the 75th and 80th percent of the distribution of changes in the debt-to-GDP ratios).
     - Rationale: captures broader fiscal-position changes including shocks to borrowing costs, stock-flow adjustments, and below-the-line financing operations; higher-than-expected debt levels may affect perceptions of fiscal sustainability and inflation expectations even without primary balance changes.
- Narrative approach:
  - Use of Carriere-Swallow and others (2020) database to identify fiscal consolidation episodes based on policy documents where changes were motivated by intent to reduce the budget deficit rather than cyclical conditions.
  - Strengths: excludes passive fiscal-position changes driven by exchange rates, commodity prices, or demand shifts.
  - Limitations: covers only fiscal contractions (not expansions) and is available for a reduced sample: Latin American countries over 1986-2020.
- Focus on unanticipated changes:
  - Timing when fiscal actions are incorporated into agents’ expectations is crucial; the paper aims to estimate impacts of unanticipated fiscal policy changes by excluding episodes fully expected by professional forecasters (as noted above).

### Data and sample
- Inflation expectations:
  - Data source: Consensus Forecast.
  - Sample period: 2000-2023.
  - Coverage: a large sample of advanced and emerging market economies.
- Macroeconomic indicators:
  - Source: World Economic Outlook (WEO) database.
  - Variables used include government primary balance, real GDP growth, output gap, and inflation.

### Research scope and heterogeneity considerations
- The paper examines how the relationship between fiscal policy and inflation expectations varies:
  - In high-inflation environments.
  - Under weak fiscal positions.
  - With differing market perceptions of sovereign risk.
  - Across monetary and exchange rate frameworks.
- Aim to provide estimates across a broad country coverage (advanced economies and emerging markets) acknowledging that effects may vary across macroeconomic and institutional settings.

*Source: IMF Working Papers WP/25/231 — The Impact of Fiscal Policy on Inflation Expectations*

### Annex report summary statistics of the variables constructed whereas Table 4 lists the countries in our sample.

### wpiea2025231-source-pdf - Annex report summary statistics of the variables constructed whereas Table 4 lists the countries in our sample.

### Summary statistics of identified fiscal shocks
- No significant differences in summary statistics of identified fiscal shocks with quantitative thresholds across AEs and EMs in likelihood, mean, and standard deviation.
- Unconditional probabilities:
  - Unexpected fiscal consolidation greater than 1.5 percent of GDP: 7.2 percent for AEs and 7.8 percent in EMs.
  - Fiscal expansion greater than 1.5 percent of GDP: 13.0 percent for AEs and 13.4 percent in EMs.
- Small changes in fiscal primary balances have only a marginal impact on inflation expectations; large policy shifts are required to influence expectations materially.

### Empirical strategy
- Method: Local projection approach (Jorda (2005)) estimating:
  - 휋ᵢₜ₊ₕᵉ = 훼ₕ 휋ᵢₜ₋₁ᵉ + [Iₑₘ βₑₘₕ + (1−Iₑₘ) βₐₑₕ] FiscalShockᵢₜ + γₕ Xᵢₜ + λₜₕ + μᵢₕ + εᵢₜₕ
- Controls (Xᵢₜ): contemporaneous and lagged values of the output gap, inflation, the fiscal primary balance; country and time fixed effects.
- Sample: 35 advanced economies (AEs) and 17 major emerging markets (EMs).
- Iₑₘ: indicator for EMs; permits differential coefficients βₐₑₕ (AEs) and βₑₘₕ (EMs).

### Main empirical findings
- Large changes in the primary balance (larger than 1.5 percent of GDP):
  - Associated with a statistically significant change in 2-year ahead inflation expectations over a 3-year period in EMs.
  - A 1 percentage point primary balance contraction is associated with a 0.2 percentage points decline in inflation expectations (Figure 1).
- For AEs:
  - No statistically significant impact of fiscal policy shocks on 2-year ahead inflation expectations.
  - Possible reasons: stronger monetary policy frameworks keeping expectations anchored; less exposure to negative feedback loops from dollar-denominated debt and exchange rate depreciation.
- Robustness:
  - Results using changes in the primary balance are robust to identifying fiscal shocks as changes in the cyclically-adjusted primary balance, with similar magnitudes.
  - Narrative-identified fiscal consolidation episodes (extended dataset from Carriere-Swallow and others (2020)) produce larger estimated impacts: a 1 percentage point fiscal consolidation is associated with a cumulative 1 percentage points decline in 2-year ahead inflation expectations over a 3-year horizon.
- Fiscal composition:
  - Expenditure-based fiscal consolidations have an even larger impact on inflation expectations than overall consolidations.
  - Tax-based fiscal consolidations do not have a statistically significant impact on inflation expectations.

### Debt and inflation expectations
- Large shifts in debt-to-GDP:
  - Declines in debt ratios larger than 3 percent of GDP and 4 percent of GDP are associated with a reduction in inflation expectations of about 0.1 percentage points in EMs.
  - Increases in debt-to-GDP ratios are associated with higher inflation expectations.
- State-dependent findings for EMs:
  - Fiscal consolidations produce larger reductions in inflation expectations when:
    - Inflation is high (when inflation is in the highest 90th percentile): a 1 percentage point of GDP fiscal consolidation is associated with a reduction of about 0.5 percentage points in 2-year ahead inflation expectations (Figure 2).
    - Debt-to-GDP ratios are high (highest 10 percent of the distribution): a 1 percentage point of GDP fiscal consolidation is associated with a reduction of about 0.7 percentage points in 2-year ahead inflation expectations (Figure 2).
  - Fiscal expansions show an upwards-sloping impact across inflation and public debt distributions: larger increases in inflation expectations when inflation is high and public debt is elevated (Figure 3).
- Sovereign risk interaction:
  - Increases in debt-to-GDP ratios are associated with larger increases in inflation expectations at higher levels of sovereign spreads (EMBI), consistent with greater concerns about fiscal dominance when fiscal positions are weak (Figure 6).
  - The impact of debt shocks on inflation expectations is higher in inflationary environments.

### Monetary and exchange rate frameworks, institutions, and state dependence
- Institutional factors shaping the fiscal–inflation expectations link:
  - Independent central banks with price stability mandates can minimize the impact of fiscal policy on inflation and expectations.
  - The presence of fiscal councils or responsibility laws can reduce perceived probabilities of fiscal dominance and weaken the impact of fiscal actions on inflation expectations.
  - Countercyclical fiscal policy (deficits consistent with the cyclical position) reduces the impact of fiscal policy on inflation expectations.
- Fiscal space:
  - Ample fiscal space reduces the short-run impact of revenue or expenditure changes on sovereign default likelihood and fiscal dominance; fiscal expansions in such contexts may not affect inflation expectations.
  - Limited fiscal space increases the risk of a vicious circle of sovereign risk and inflation.
- State-dependent estimates (EMs):
  - Fiscal consolidations have a larger impact on inflation expectations in high-inflation environments and when debt-to-GDP is high.
  - Fiscal consolidations have a larger impact under fixed or less flexible exchange rate regimes than under fully flexible exchange rate frameworks, consistent with larger fiscal multipliers under fixed regimes (Figure 7).
  - Fiscal policy has a larger impact on inflation expectations when central bank independence is weak (Figure 7).

*Source: wpiea2025231-source-pdf - Annex report summary statistics of the variables constructed whereas Table 4 lists the countries in our sample.*

### Conclusions

### Conclusions

### Main findings
- Policymakers face a complex trade-off: debt levels are relatively high while inflation is not yet back to target in many economies.
- Emerging economies face more significant challenges due to greater exposure to difficult external environments and less established domestic policy institutions.
- Fiscal policy can affect inflation and inflation expectations through multiple channels, including sovereign risk, exchange rate dynamics, and interactions with other macroeconomic policies.
- Economies with robust policy frameworks that run prudent fiscal balances and low inflation levels may better maintain anchored inflation expectations even when pursuing expansionary fiscal policy.
- A stronger fiscal policy framework can provide more leeway to respond to future shocks and crises rather than solely acting as a policy constraint.

### Implications for emerging economies
- Dependence on foreign savings increases vulnerability to exchange rate pressures, which can amplify sovereign risk, currency depreciation, and inflation/inflation expectations dynamics.
- Empirical results emphasize the heightened importance of implementing prudent fiscal policy in emerging economies to mitigate macroeconomic instability risks.

### Policy recommendations
- Ensure fiscal adjustments are properly calibrated, taking into account:
  - the institutional framework;
  - the economic juncture; and
  - potential interactions with other macroeconomic policies (notably monetary policy and exchange rate management).
- Design fiscal policy to reduce spillovers on inflation and to support the anchoring of inflation expectations.
- Pursue fiscal consolidations in ways that help reduce inflationary pressures and inflation expectations.
- Build and maintain robust fiscal policy frameworks and prudent fiscal balances to create policy space for responding to shocks.

### Supporting empirical evidence and key statistics
- Summary statistics on inflation and inflation expectations (selected):
  - Advanced economies (AEs): Inflation — N 806.0; Mean 2.5; SD 2.2; Min -0.3; p25 1.1; Median 2.1; p75 3.2; Max 17.2.
  - Major EMs: Inflation — N 371.0; Mean 5.0; SD 3.3; Min -0.3; p25 2.8; Median 4.2; p75 6.5; Max 18.7.
  - Others: Inflation — N 2694.0; Mean 5.5; SD 4.2; Min -0.3; p25 2.2; Median 4.5; p75 7.8; Max 18.7.
  - 1-year Ahead Inflation Expectations (AEs) — N 661.0; Mean 2.3; SD 1.1; Min 1.0; p25 1.6; Median 2.0; p75 2.7; Max 9.7.
- Summary statistics: fiscal shocks (percent of GDP, selected):
  - AEs: Change in primary balance — N 660.0; Mean 0.1; SD 1.5; Min -4.2; p25 -0.7; Median 0.2; p75 1.0; Max 3.5.
  - Major EMs: Change in primary balance — N 357.0; Mean -0.0; SD 1.3; Min -4.2; p25 -0.9; Median 0.1; p75 0.8; Max 3.2.
  - Others: Change in primary balance — N 2183.0; Mean -0.0; SD 1.7; Min -4.2; p25 -1.1; Median -0.0; p75 1.1; Max 3.6.
  - AEs: Change in public debt — N 690.0; Mean 0.2; SD 3.7; Min -10.0; p25 -2.1; Median -0.3; p75 2.3; Max 11.7.
  - Major EMs: Change in public debt — N 372.0; Mean 0.3; SD 3.6; Min -10.1; p25 -1.8; Median 0.1; p75 2.3; Max 11.5.
- Summary statistics: controls (selected):
  - AEs: Output gap (% potential GDP) — N 864.0; Mean -0.5; SD 2.9; Min -18.3; p25 -1.6; Median -0.2; p75 1.0; Max 13.4.
  - AEs: Public Debt (% GDP) — N 776.0; Mean 58.6; SD 29.0; Min 9.6; p25 36.5; Median 53.4; p75 79.6; Max 129.0.
  - Major EMs: Public Debt (% GDP) — N 400.0; Mean 44.0; SD 17.9; Min 9.8; p25 31.7; Median 41.3; p75 55.3; Max 96.0.
  - Others: Primary Balance (%GDP) — N 2730.0; Mean -0.7; SD 3.0; Min -7.5; p25 -2.6; Median -0.9; p75 1.0; Max 8.3.
- Notes on empirical figures (from annex figures and tables):
  - Impulse responses reported as cumulative responses over a 3-year period following a 1-percent-of-GDP shock.
  - Confidence indicators: Bars in figures show 1 standard deviations or the 90th percentile as noted in the annex figure captions.
  - Shock thresholds: Consolidation or expansion shocks 2 use a threshold of 1 percent of GDP; shocks 3 use a threshold of 1.5 percent of GDP.

*Source: wpiea2025231-source-pdf — Conclusions.*

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_Source: https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025231-source-pdf.pdf_