NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Andrew Scott

Department of Economics
London Business School
Sussex Place,
London NW1 4SA, UK

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

July 2008Inflation Implications of Rising Government Debt
with Chryssi Giannitsarou
in NBER International Seminar on Macroeconomics 2006, Lucrezia Reichlin and Kenneth West, organizers
October 2006Inflation Implications of Rising Government Debt
with Chryssi Giannitsarou: w12654
The intertemporal budget constraint of the government implies a relationship between a ratio of current liabilities to the primary deficit with future values of inflation, interest rates, GDP and narrow money growth and changes in the primary deficit. This relationship defines a natural measure of fiscal balance and can be used as an accounting identity to examine the channels through which governments achieve fiscal sustainability. We evaluate the ability of this framework to account for the fiscal behaviour of six industrialised nations since 1960. We show how fiscal imbalances are mainly removed through adjustments in the primary deficit (80-100%), with less substantial roles being played by inflation (0-10%) and GDP growth (0-20%). Focusing on the relation between fiscal imbalances and...

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