{
  "title": "The Effects of Inflation on Public Finances",
  "publication": "IMF Working Papers, May 5, 2023",
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  "summary": "Does inflation help improve public finances? This paper documents the dynamic responses of fiscal variables to an inflation shock, using both quarterly and annual panel data for a broad set of economies.",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- Inflation shocks are estimated to improve fiscal balances temporarily.\n- Nominal revenues track inflation closely.\n- Nominal primary expenditures take longer to catch up to inflation.\n- Inflation spikes lead to a persistent reduction in debt to GDP ratios, driven by:\n  - the primary balance improvement, and\n  - the nominal GDP denominator channel.\n- Debt only falls with inflation surprises—rises in inflation expectations do not improve debt dynamics.\n- Results are robust to using various inflation measures and instrumental variables."
    },
    {
      "heading": "Data and scope",
      "content": "- Uses both quarterly and annual panel data for a broad set of economies."
    },
    {
      "heading": "Methodology and robustness",
      "content": "- Dynamic responses of fiscal variables to an inflation shock are documented.\n- Robustness checks include alternative inflation measures and instrumental variables."
    },
    {
      "heading": "Policy implications",
      "content": "- Temporary improvement in fiscal balances following inflation shocks suggests limited scope for relying on inflation for durable fiscal consolidation.\n- The ineffectiveness of inflation expectation rises in improving debt dynamics indicates limits to debt debasement strategies."
    },
    {
      "heading": "Keywords and subjects (as listed)",
      "content": "- Commodity prices, Deflation, Exchange rate arrangements, Fiscal policy, Fiscal stance, Foreign exchange, Inflation, Prices\n- Keywords: Commodity prices, Deflation, Exchange rate arrangements, fiscal balance, Fiscal stance, Global, Inflation, inflation expectation, inflation measure, inflation outlier, inflation shock, inflation surprise, public debt\n\nDaniel Garcia-Macia. \"The Effects of Inflation on Public Finances\", IMF Working Papers 2023, 093 (May 5, 2023), accessed 8/12/2026, https://doi.org/10.5089/9798400241529.001.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/05/05/the-effects-of-inflation-on-public-finances-533099"
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    "Authors: Daniel Garcia-Macia",
    "Published: May 5, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400241529.001",
    "Inflation shocks are estimated to improve fiscal balances temporarily.",
    "Nominal revenues track inflation closely.",
    "Nominal primary expenditures take longer to catch up to inflation.",
    "Inflation spikes lead to a persistent reduction in debt to GDP ratios, driven by:",
    "Debt only falls with inflation surprises—rises in inflation expectations do not improve debt dynamics.",
    "Results are robust to using various inflation measures and instrumental variables.",
    "Uses both quarterly and annual panel data for a broad set of economies.",
    "Dynamic responses of fiscal variables to an inflation shock are documented.",
    "Robustness checks include alternative inflation measures and instrumental variables.",
    "Temporary improvement in fiscal balances following inflation shocks suggests limited scope for relying on inflation for durable fiscal consolidation.",
    "The ineffectiveness of inflation expectation rises in improving debt dynamics indicates limits to debt debasement strategies.",
    "Commodity prices, Deflation, Exchange rate arrangements, Fiscal policy, Fiscal stance, Foreign exchange, Inflation, Prices",
    "Keywords: Commodity prices, Deflation, Exchange rate arrangements, fiscal balance, Fiscal stance, Global, Inflation, inflation expectation, inflation measure, inflation outlier, inflation shock, inflation surprise, public debt",
    "**Working Paper**"
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