Bibliographic record
Abstract
In the context of a sticky price DSGE model subject to government expenditure and preference shocks where governments issue only nominal non-contingent bonds we examine the implications for optimal inflation of changes in the level and average maturity of government debt. We analyse these relationships under two different institutional settings. In one case government pursues optimal monetary and fiscal policy in a coordinated way whereas in the alternative we assume an independent monetary authority that sets interest rates according to a Taylor rule and where the fiscal authority treats bond prices as a given. We identify the main mechanisms through which inflation is affected by debt and debt maturity (a real balance effect and an implicit profit tax) and also study additional channels through which the government achieves fiscal sustainability (tax smoothing, interest rate twisting and endogenous fluctuations in bond prices). In the case of optimal coordinated monetary and fiscal policy we find that the persistence and volatility of inflation depends on the sign, size and maturity structure of government debt. High levels of government debt do lead to higher inflation and longer maturity debt leads to more persistent inflation. However even in the presence of modest price stickiness the role of inflation is minor with the majority of fiscal adjustment achieved through changes in taxes and the primary surplus. However in the case of an independent monetary authority where debt management, monetary policy and fiscal policy are not coordinated then inflation has a much more substantial and more persistent role to play. Inflation is higher, more volatile and more persistent especially in response to preference shocks and plays a major role in achieving fiscal solvency. JEL classification: E52, E62, H21, H63 ∗Marcet is grateful for support from DGES, Monfispol and Excellence Program if Banco de Espana. Faraglia and Scott gratefully acknowledge funding from the ESRC’s World Economy and Finance Program. Oikonomou is grateful to HEC Montreal for funding. Thanks to Giorgia Palladini for research assistance. Helpful feedback from Wouter den Haan and Pedro Teles are gratefully acknowledged . †University of Cambridge and CEPR ‡Institut d’Analisi Economica, ICREA UAB, BGSE and CEPR §HEC Montreal ¶London Business School and CEPR
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.008 |
| Meta-epidemiology (narrow) | 0.000 | 0.001 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.000 | 0.001 |
| Science and technology studies | 0.000 | 0.001 |
| Scholarly communication | 0.003 | 0.001 |
| Open science | 0.001 | 0.001 |
| Research integrity | 0.002 | 0.002 |
| Insufficient payload (model declined to judge) | 0.004 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".