## Public Debt and Household Inflation Expectations

_IMF Working Papers, March 17, 2023_

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## Bibliographic details
- Authors: Francesco Grigoli, Damiano Sandri
- Published: March 17, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400235214.001

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### Study design and scope
- Randomized controlled trials conducted in the US, UK, and Brazil to examine the causal effect of public debt on household inflation expectations.
- Publication: IMF Working Papers, Working Paper No. 2023/066.
- Authors: Francesco Grigoli, Damiano Sandri.
- Date: March 17, 2023.
- Pages: 37
- Volume: 2023
- Issue: 066
- DOI: https://doi.org/10.5089/9798400235214.001
- Stock No: WPIEA2023066
- ISBN: 9798400235214
- ISSN: 1018-5941

### Key empirical findings
- People underestimate public debt levels.
- When informed about the correct levels of public debt, households increase their inflation expectations.
- The magnitude of revisions to inflation expectations is proportional to the size of the information surprise.
- Confidence in the central bank considerably reduces the sensitivity of inflation expectations to public debt.
- Households associate high public debt with stagflationary effects.
- The sensitivity of inflation expectations to public debt is considerably higher for women and for low-income individuals.

### Concepts, subjects, and keywords covered
- Subject areas: Central banks, Inflation, Inflation targeting, Monetary policy, Prices, Public debt, Quasi-fiscal operations.
- Keywords appearing in the source text: Capital controls, capital outflows, financial crises, Global, household inflation expectation, increase inflation expectation, Inflation, inflation expectation, Inflation targeting, public debt level, Quasi-fiscal operations, sensitivity of inflation expectation.

### Implications (as reported in the study)
- Information provision about public debt levels affects household inflation expectations; larger information surprises produce larger expectation adjustments.
- Trust in monetary authorities (central bank confidence) can mitigate the pass-through from public debt information to household inflation expectations.
- Heterogeneity in responses suggests distributional considerations: women and low-income individuals are more responsive to public debt information in forming inflation expectations.
- Perceptions linking high public debt to stagflationary outcomes imply that public debt communication and fiscal policy credibility can influence inflation beliefs beyond immediate fiscal mechanics.

*IMF Working Paper No. 2023/066 — "Public Debt and Household Inflation Expectations" by Francesco Grigoli and Damiano Sandri, March 17, 2023.*

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2023/03/20/public-debt-and-household-inflation-expectations-530644_