Rising inflation in the wake of unprecedented debt financed stimulus packages raises concerns about a looming return of persistent inflation, as governments may be tempted to monetize debt. In this paper, we ask whether governments can use real (TIPS) bonds as part of the government debt...

In the wake of rising inflation in the aftermath of unprecedented debt financed stimulus packages, we ask: Can governments use real bonds (TIPS) as part of their debt portfolio to commit to stable inflation rates? We propose a novel framework of optimal debt management in the presence of sticky...