Pichler, Paul; Sorger, Gerhard; Niemann, Stefan - Society for Economic Dynamics - SED - 2011
incentive to erode the real value of nominal public debt by means of surprise inflation renders inflation expectations and, in … further consequence, equilibrium inflation rates highly correlated with the stock of public debt. Debt, in turn, is highly …We describe a simple mechanism that generates inflation persistence in a standard sticky-price model of optimal fiscal …