Missed inflation target has ‘sizeable’ fiscal impact – paper

Persistent undershooting by ECB caused problems for countries with long-duration debt, authors say


Cases where a credible central bank persistently misses its inflation target can severely impact government finances, a new working paper finds.

The research, by Michele Andreolli and Hélène Rey, examines how the many years in which the European Central Bank fell short of its inflation target affected government budgets in the eurozone.

Because eurozone countries have very different debt structures, this can create differentials in how monetary policy impacts government finances, the authors

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