Valencia, Oscar M.; Gamboa-Arbelaez, Juliana; Sánchez, … - 2023
This paper explores the effect of inflation supply and demand shocks on government debt. It identifies the shocks using … regressions and local projections suggest that supply shocks lead to persistent increases in government debt, while demand shocks … both supply and demand shocks by more than three times. Specifically, supply shocks increase debt through higher borrowing …