Download or read book Is High Debt Constraining Monetary Policy? Evidence from Inflation Expectations written by Mr. Luis Brandao Marques and published by International Monetary Fund. This book was released on 2023-06-30 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines whether high government debt levels pose a challenge to containing inflation. It does so by assessing the impact of government debt surprises on inflation expectations in advanced- and emerging market economies. It finds that debt surprises raise long-term inflation expectations in emerging market economies in a persistent way, but not in advanced economies. The effects are stronger when initial debt levels are already high, when inflation levels are initially high, and when debt dollarization is significant. By contrast, debt surprises have only modest effects in economies with inflation targeting regimes. Increased debt levels may complicate the fight against inflation in emerging market economies with high and dollarized debt levels, and weaker monetary policy frameworks.