IMF Working Papers

Public Debt and Household Inflation Expectations

By Francesco Grigoli, Damiano Sandri

March 17, 2023

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Francesco Grigoli, and Damiano Sandri. Public Debt and Household Inflation Expectations, (USA: International Monetary Fund, 2023) accessed December 7, 2024

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Summary

We use randomized controlled trials in the US, UK, and Brazil to examine the causal effect of public debt on household inflation expectations. We find that people underestimate public debt levels and increase inflation expectations when informed about the correct levels. The extent of the revisions is proportional to the size of the information surprise. Confidence in the central bank considerably reduces the sensitivity of inflation expectations to public debt. We also show that people associate high public debt with stagflationary effects and that the sensitivity of inflation expectations to public debt is considerably higher for women and low-income individuals.

Keywords: Capital controls, Capital outflows, Financial crises

Publication Details

  • Pages:

    37

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2023/066

  • Stock No:

    WPIEA2023066

  • ISBN:

    9798400235214

  • ISSN:

    1018-5941