IDEAS home Printed from https://ideas.repec.org/a/onb/oenbmp/y2015i1b3.html
   My bibliography  Save this article

Impact of Inflation on Fiscal Aggregates in Austria

Author

Listed:
  • Doris Prammer

    (Oesterreichische Nationalbank)

  • Lukas Reiss

    (Oesterreichische Nationalbank, Economic Analysis Division)

Abstract

In Austria, temporary shocks to inflation (with unchanged real macroeconomic developments) impact the primary balance, i.e. the overall budget balance excluding interest payments, mainly via taxes and transfers whose brackets or rates are not indexed to inflation. Even though the overall effect of such shocks on budget balances would be very small in Austria, below-average inflation, for example, is still negative from a government’s viewpoint because it significantly raises the public debt ratio. Lower inflation moreover depresses the gains made from both bracket creep and the devaluation of nominally fixed transfers, which is, however, somewhat compensated for by decreasing interest payments. Households, by contrast, benefit from lower inflation as it causes their net tax burden to go down.

Suggested Citation

  • Doris Prammer & Lukas Reiss, 2015. "Impact of Inflation on Fiscal Aggregates in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 27-41.
    • Handle: RePEc:onb:oenbmp:y:2015:i:1:b:3
    as

    Download full text from publisher

    File URL: https://www.oenb.at/dam/jcr:9744bd80-5752-4c05-bd97-8229511210fb/mop_2015_q1_analyses3.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Francesca Gastaldi & Paolo Liberati & Chiara Rapallini, 2008. "A Decomposition of the Personal Income Tax Changes in Italy: 1995-2000," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(1), pages 87-114, March.
    2. Vito Tanzi & Mario I. Blejer & Mario O. Teijeiro, 1987. "Inflation and the Measurement of Fiscal Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 34(4), pages 711-738, December.
    3. Kremer, Jana & Rodrigues Braz, Cláudia & Brosens, Teunis & Langenus, Geert & Momigliano, Sandro & Spolander, Mikko, 2006. "A disaggregated framework for the analysis of structural developments in public finances," Working Paper Series 579, European Central Bank.
    4. Doris Prammer & Lukas Reiss, 2014. "Fiscal Projections by the Oesterreichische Nationalbank: Methods and Motives," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 31-48.
    5. Margit Schratzenstaller, 2008. "Budgetpolitische Ansatzpunkte zur Kompensation der Inflation," WIFO Monatsberichte (monthly reports), WIFO, vol. 81(9), pages 665-676, September.
    6. Mr. Bernardin Akitoby & Mr. Takuji Komatsuzaki & Mr. Ariel J Binder, 2014. "Inflation and Public Debt Reversals in the G7 Countries," IMF Working Papers 2014/096, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. N. N., 2015. "WIFO-Monatsberichte, Heft 5/2015," WIFO Monatsberichte (monthly reports), WIFO, vol. 88(5), May.
    2. Olegs Tkacevs & Karsten Staehr & Katri Urke, 2023. "Fiscal Performance under Inflation and Inflation Surprises: Evidence from Fiscal Reaction Functions for the Euro Area," Working Papers 2023/04, Latvijas Banka.
    3. Peter Brandner, 2015. "Anmerkungen zur kalten Progression und ihrer Berechnung," WIFO Monatsberichte (monthly reports), WIFO, vol. 88(5), pages 463-471, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Duarte, Cláudia & Maria, José R. & Sazedj, Sharmin, 2020. "Trends and cycles under changing economic conditions," Economic Modelling, Elsevier, vol. 92(C), pages 126-146.
    2. Jérôme Creel & Henri Sterdyniak, 1995. "Les déficits publics en Europe," Post-Print hal-03458224, HAL.
    3. Campbell Leith & Eric Leeper, 2016. "Understanding Inflation as a Joint Monetary-Fiscal Phenomenon," Working Papers 2016_01, Business School - Economics, University of Glasgow.
    4. Cláudia Braz, 2006. "The Calculation of Cyclically Adjusted Balances at Banco de Portugal: An update," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    5. Gábor P. Kiss, 2007. "One-off and off-budget items: An alternative approach," MNB Conference Volume, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 1(1), pages 18-27, December.
    6. Jérôme Creel & Henri Sterdyniak, 1995. "Les déficits publics en Europe : causes, conséquences ou remèdes à la crise ?," Revue de l'OFCE, Programme National Persée, vol. 54(1), pages 57-100.
    7. Jef Vuchelen & Jesse De Wit, 2008. "An Evaluation of the OECD Cyclically-Adjusted Primary Government Balance Forecasts," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 51(4), pages 459-479.
    8. Morris, Richard & Reiss, Lukas, 2020. "A decomposition of structural revenue developments for euro area member states," Working Paper Series 2455, European Central Bank.
    9. European Fiscal Board (EFB), 2020. "2020 annual report of the European Fiscal Board," Annual reports 2020, European Fiscal Board.
    10. Tomas Havranek & Zuzana Irsova & Jiri Schwarz, 2016. "Dynamic elasticities of tax revenue: evidence from the Czech Republic," Applied Economics, Taylor & Francis Journals, vol. 48(60), pages 5866-5881, December.
    11. Cláudia Braz & Maria Manuel Campos & Sharmin Sazedj, 2019. "The new ESCB methodology for the calculation of cyclically adjusted budget balances: an application to the Portuguese case," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    12. Attinasi, Maria Grazia & Klemm, Alexander, 2016. "The growth impact of discretionary fiscal policy measures," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 265-279.
    13. David Amaglobeli & Mr. Valerio Crispolti & Ms. Era Dabla-Norris & Pooja Karnane & Florian Misch, 2018. "Tax Policy Measures in Advanced and Emerging Economies: A Novel Database," IMF Working Papers 2018/110, International Monetary Fund.
    14. Peter Brandner, 2015. "Anmerkungen zur kalten Progression und ihrer Berechnung," WIFO Monatsberichte (monthly reports), WIFO, vol. 88(5), pages 463-471, May.
    15. Manuel Coutinho Pereira & Lara Wemans, 2015. "Output Effects of a Measure of Tax Shocks Based on Changes in Legislation for Portugal," Hacienda Pública Española / Review of Public Economics, IEF, vol. 215(4), pages 27-62, December.
    16. Afonso, António & Jalles, João Tovar, 2019. "The Fiscal consequences of deflation: Evidence from the Golden Age of Globalization," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 129-147.
    17. Silvia Rocha-Akis & Viktor Steiner & Christine Zulehner, 2016. "Verteilungswirkungen des österreichischen Steuer- und Sozialabgabensystems 2007/2016," WIFO Monatsberichte (monthly reports), WIFO, vol. 89(5), pages 347-359, May.
    18. Eyzaguirre, Nicolás, 1990. "Ahorro e inversión bajo restricción externa y fiscal: el caso de Chile, 1982-1987," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 29636, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    19. Margit Schratzenstaller, 2009. "Steuerreform 2009/10," WIFO Monatsberichte (monthly reports), WIFO, vol. 82(9), pages 687-702, September.
    20. Talknice Saungweme & Nicholas M. Odhiambo, "undated". "Public Debt And Inflation Dynamics: Empirical Evidence From Zimbabwe," Working Papers AESRI05, African Economic and Social Research Institute (AESRI).

    More about this item

    Keywords

    bracket creep; inflation indexation; Austria; social benefits;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:onb:oenbmp:y:2015:i:1:b:3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rita Glaser-Schwarz (email available below). General contact details of provider: https://edirc.repec.org/data/oenbbat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.