Bundesbank researchers test if higher inflation could ease public debt burden

Inflation rate

A new discussion paper from researchers at the Deutsche Bundesbank examines whether central banks could help ‘inflate away' public debt by allowing inflation to rise toward a higher target – finding that the benefit of such a strategy would be greatest in countries whose public debt has long average maturities, such as the UK.

In the paper, Public Debt and Changing Inflation Targets, authors Michael Krause and Stéphane Moyen run their model on the US situation and find that a temporary 400-basis

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