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Inflating away the public debt? An empirical assessment

Hilscher, Jens, Raviv, Alon and Reis, Ricardo (2021) Inflating away the public debt? An empirical assessment. Review of Financial Studies. 0 - 0. ISSN 0893-9454

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Identification Number: 10.1093/rfs/hhab018

Abstract

This paper proposes a new method to measure the impact of inflation on the real value of public debt. The distribution of debt debasement is based on two inputs: the distribution of privately-held nominal debt by maturity, for which we provide new estimates, and the distribution of risk-adjusted inflation dynamics, for which we provide a novel copula estimator using options data. We find that it is unlikely that inflation by itself can lower the U.S. fiscal burden significantly because debt is concentrated at short maturities and perceived inflation shocks have little short-run persistence and are small.

Item Type: Article
Official URL: https://academic.oup.com/rfs
Additional Information: © 2020 The Authors
Divisions: Economics
Subjects: H Social Sciences > HG Finance
H Social Sciences > HJ Public Finance
Date Deposited: 02 Dec 2020 11:15
Last Modified: 25 Feb 2021 00:14
URI: http://eprints.lse.ac.uk/id/eprint/107543

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