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Inflation and Public Debt

Author

Listed:
  • Jose Pablo Barquero-Romero

    (Department of Economic Research, Central Bank of Costa Rica)

  • Kerry Loaiza-Marín

    (Department of Economic Research, Central Bank of Costa Rica)

Abstract

This paper aims to determine if a deterioration in public finances, understood as an increase in public debt, tends to increase inflation. We study the relationship between public debt, economic growth, money supply growth and inflation. To do this we follow the methodology proposed by Kwon, McFarlane and Robinson (2009), who perform a panel data estimation using a sample of net debtor´s countries. We find that for countries who already have a high level of public debt, further increases in public debt are inflationary. ***Resumen: Esta investigación busca determinar si un deterioro de las finanzas públicas, en la forma de un mayor crecimiento de la deuda pública, tiende a incrementar la inflación. Se estudian los efectos de cambios e interrelaciones entre la deuda pública, el crecimiento del dinero, el crecimiento económico y la inflación, siguiendo la metodología utilizada por Kwon, McFarlane y Robinson (2009), mediante un conjunto de datos de panel para una muestra de países considerados deudores netos. Se encuentra que para países que poseen un alto nivel de deuda pública sus incrementos son inflacionarios.

Suggested Citation

  • Jose Pablo Barquero-Romero & Kerry Loaiza-Marín, 2019. "Inflation and Public Debt," Documentos de Trabajo 1701, Banco Central de Costa Rica.
    • Handle: RePEc:apk:doctra:1701
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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