Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71902
Authors: 
Krause, Michael U.
Moyen, Stéphane
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 06/2013
Abstract: 
What are the effects of a higher central bank inflation target on the burden of real public debt? Several recent proposals have suggested that even a moderate increase in the inflation target can have a pronounced effect on real public debt. We consider this question in a New Keynesian model with a maturity structure of public debt and an imperfectly observed inflation target. We find that moderate changes in the inflation target only have significant effects on real public debt if they are essentially permanent. Moreover, the additional benefits of not communicating a change in the inflation target are minor.
Subjects: 
public debt
learning
inflation target
callable perpetuity
debt maturity
JEL: 
E31
E52
H63
ISBN: 
978-3-86558-890-6
Document Type: 
Working Paper

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