What happens if the government's willingness to stabilize a large stock of debt is waning, while the central bank is adamant about preventing a rise in inflation? The large fiscal imbalance brings about inflationary pressures, triggering a monetary tightening, further debt accumulation, and...

According to the Globalization Hypothesis, global economic slack should progressively replace the domestic output gap in driving inflation as globalization increases. We investigate the empirical evidence in favor of this prediction by using a Time-varying VAR. Two main results emerge from the...

We develop a theoretical framework to account for the observed instability of the link between inflation and fiscal imbalances across time and countries. Current policy makers’ behavior influences agents’ beliefs about the way debt will be stabilized. The standard policy mix consists of a...

Under the Globalization Hypothesis for inflation, as globalization increases, global economic slack should progressively replace the domestic gap in driving inflation. In order to assess the empirical support for this theoretical prediction, we use impulse response functions of inflation to...

We develop a theoretical framework to account for the observed instability of the link between inflation and …fiscal imbalances across time and countries. Current policy makers behavior influences agents' beliefs about the way debt will be stabilized. The standard policy mix consists of a...

What happens if the government's willingness to stabilize a large stock of debt is waning, while the central bank is adamant about preventing a rise in inflation? The large fiscal imbalance brings about inflationary pressures, triggering a monetary tightening, further debt accumulation, and...

Low and stable inflation requires an appropriate fiscal framework aimed at stabilizing government debt. Historically, trend inflation is critically influenced by actual or perceived changes to this framework, while cost-push shocks only account for short-lasting movements in inflation. Before...