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Fiscal Consequences of Missing an Inflation Target

Author

Listed:
  • Michele Andreolli

    (Boston College)

  • Hélène Rey

    (London Business School
    NBER
    CEPR)

Abstract

The European Central Bank is unique in setting monetary policy for several sovereign states with heterogeneous debt levels and different maturity structures. The monetary–fiscal nexus is central to the functioning of the euro area. We focus on one particular aspect of that nexus, the effect of the reliability of the European Central Bank monetary policy on public debt burdens. We show that when the ECB misses its inflation target this has large heterogeneous fiscal consequences for Euro Area countries.

Suggested Citation

  • Michele Andreolli & Hélène Rey, 2024. "Fiscal Consequences of Missing an Inflation Target," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(2), pages 701-772, June.
    • Handle: RePEc:pal:imfecr:v:72:y:2024:i:2:d:10.1057_s41308-024-00239-w
    DOI: 10.1057/s41308-024-00239-w
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    Cited by:

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    2. Equiza-Goñi, Juan, 2023. "Euro area inflation linked debt: An evaluation," Economics Letters, Elsevier, vol. 232(C).

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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