Inflating Away the Public Debt? An Empirical Assessment /
Hilscher, Jens.
Inflating Away the Public Debt? An Empirical Assessment / Jens Hilscher, Alon Raviv, Ricardo Reis. - Cambridge, Mass. National Bureau of Economic Research 2014. - 1 online resource: illustrations (black and white); - NBER working paper series no. w20339 . - Working Paper Series (National Bureau of Economic Research) no. w20339. .
July 2014.
We propose and implement a method that provides quantitative estimates of the extent to which higher- than-expected inflation can lower the real value of outstanding government debt. Looking forward, we derive a formula for the debt burden that relies on detailed information about debt maturity and claimholders, and that uses option prices to construct risk-adjusted probability distributions for inflation at different horizons. The estimates suggest that it is unlikely that inflation will lower the US fiscal burden significantly, and that the effect of higher inflation is modest for plausible counterfactuals. If instead inflation is combined with financial repression that ex post extends the maturity of the debt, then the reduction in value can be significant.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
Inflating Away the Public Debt? An Empirical Assessment / Jens Hilscher, Alon Raviv, Ricardo Reis. - Cambridge, Mass. National Bureau of Economic Research 2014. - 1 online resource: illustrations (black and white); - NBER working paper series no. w20339 . - Working Paper Series (National Bureau of Economic Research) no. w20339. .
July 2014.
We propose and implement a method that provides quantitative estimates of the extent to which higher- than-expected inflation can lower the real value of outstanding government debt. Looking forward, we derive a formula for the debt burden that relies on detailed information about debt maturity and claimholders, and that uses option prices to construct risk-adjusted probability distributions for inflation at different horizons. The estimates suggest that it is unlikely that inflation will lower the US fiscal burden significantly, and that the effect of higher inflation is modest for plausible counterfactuals. If instead inflation is combined with financial repression that ex post extends the maturity of the debt, then the reduction in value can be significant.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.