Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper quantitatively assesses the effects of inflation shocks on the public debt-to-GDP ratio in 19 advanced economies using simulation and estimation approaches. The simulations based on the debt dynamics equation and estimations of impulse responses by local projections both suggest that a 1 percentage point shock to the inflation rate reduces the debt-to-GDP ratio by about 0.5 to 1 percentage points. The results also suggest that the impact is larger and more persistent when the debt maturity is longer, but the difference from the benchmark case is not significant. These results imply that modestly higher inflation, even if accompanied by some financial repression, could reduce the public debt burden only marginally in many advanced economies.

Advanced Economies --- Debt Markets --- Debt Service Burden --- Finance and Financial Sector Development --- Financial Repression --- Inflation --- Macroeconomics and Economic Growth --- Public Debt --- Public Sector Development

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Debt in emerging market and developing economies (EMDEs) is at its highest level in half a century. In about nine out of 10 EMDEs, debt is higher now than it was in 2010 and, in half of the EMDEs, debt is more than 30 percentage points of gross domestic product higher. Historically, elevated debt levels increased the incidence of debt distress, particularly in EMDEs and particularly when financial market conditions turned less benign. This paper reviews an encompassing menu of options that have, in the past, helped lower debt burdens. Specifically, it examines orthodox options (enhancing growth, fiscal consolidation, privatization, and wealth taxation) and heterodox options (inflation, financial repression, debt default and restructuring). The mix of feasible options depends on country characteristics and the type of debt. However, none of these options comes without political, economic, and social costs. Some options may ultimately be ineffective unless vigorously implemented. Policy reversals in difficult times have been common. The challenges associated with debt reduction raise questions of global governance, including to what extent advanced economies can cast their net wider to cushion prospective shocks to EMDEs.

Debt Burden --- Debt Markets --- Debt Restructuring --- Debt Service --- Debt Sustainability --- Economic Growth --- Economic Policy, Institutions and Governance --- Finance and Financial Sector Development --- Financial Repression --- Fiscal and Monetary Policy --- Fiscal Consolidation --- Inflation --- Macroeconomics and Economic Growth --- Public Sector Development

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Financial repression resurfaced in the wake of the global financial crisis and might become a common feature in the post Covid-19 world. To advance knowledge and inform policy advice, this paper presents a new database on interest rate controls, a popular form of financial repression, based on a survey of 108 countries, representing 88 percent of global gross domestic product. The data cover such aspects of interest rate controls as types of controls, legal basis, intended objectives, methodologies, and enforcement rules. In an attempt to provide a meaningful characterization of the data, the paper also provides a preliminarily estimate of the degree of bindingness of the interest rate control regime in a country and presents simple correlations with other financial repression policies.

Capital Markets and Capital Flows --- Central Bank --- Finance and Financial Sector Development --- Financial Liberalization --- Financial Regulation --- Financial Regulation and Supervision --- Financial Repression --- Financial Structures --- Interest Rate --- Interest Rate Control --- Macroeconomic Management --- Macroeconomics and Economic Growth