Public Finances and Inflation: The Case of Spain

28 Pages Posted: 1 Oct 2016

See all articles by Pablo Hernández de Cos

Pablo Hernández de Cos

Banco de España

Samuel Hurtado

Banco de España

Francisco Marti

Banco de España

Javier J. Pérez

Banco de España - Research Department

Date Written: September 30, 2016

Abstract

We empirically explore the influence of inflation on fiscal variables in the short, medium and long run, for the case of the Spanish economy, in particular to draw policy lessons for the design of the ongoing process of rebalancing of fiscal accounts. We focus on this topic through the lenses of:

(i) the government budget constraint, to assess the influence of inflation on changes in public debt;

(ii) accounting decompositions of nominal revenue and expenditure items into their real and price parts;

(iii) a large-scale macroeconometric model that contains a detailed fiscal policy block; and

(iv) a long-run accounting model on pension expenditure.

Keywords: inflation, public finances, public debt, fiscal consolidation

JEL Classification: E31, E62, H6

Suggested Citation

Hernández de Cos, Pablo and Hurtado, Samuel and Marti, Francisco and Perez, Javier J., Public Finances and Inflation: The Case of Spain (September 30, 2016). Banco de Espana Occasional Paper No. 1606. Available at SSRN: https://ssrn.com/abstract=2845787 or http://dx.doi.org/10.2139/ssrn.2845787

Pablo Hernández de Cos (Contact Author)

Banco de España ( email )

Madrid, 28014
Spain

Samuel Hurtado

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

HOME PAGE: http://www.bde.es

Francisco Marti

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Javier J. Perez

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain

HOME PAGE: http://www.bde.es/investigador/staff/95.htm

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