Díaz-Giménez, Javier; Giovannetti, Giorgia; Marimon, Ramon - Federal Reserve Bank of Chicago - 2004
debt is nominal, the incentive to generate unanticipated inflation increases the cost of the outstanding debt even if no … unanticipated inflation episodes occur in equilibrium. Without full commitment, the optimal sequential policy is to deplete the … outstanding stock of debt progressively until these extra costs disappear. Nominal debt is therefore a burden on monetary policy …