02197cas a2200265 a 4500 AALejournalIMF014458 230101c9999 xx r poo 0 0eng d 5.00 USD 9781498369954 1018-5941 BD-DhAAL BD-DhAAL Akitoby, Bernardin. Inflation and Public Debt Reversals in the G7 Countries / Bernardin Akitoby, Takuji Komatsuzaki, Ariel Binder. Washington, D.C. : International Monetary Fund, 2014. 1 online resource (28 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper investigates the impact of low or high inflation on the public debt-to-GDP ratio in the G-7 countries. Our simulations suggest that if inflation were to fall to zero for five years, the average net debt-to-GDP ratio would increase by about 5 percentage points over the next five years. In contrast, raising inflation to 6 percent for the next five years would reduce the average net debt-to-GDP ratio by about 11 percentage points under the full Fisher effect and about 14 percentage points under the partial Fisher effect. Thus higher inflation could help reduce the public debt-to-GDP ratio somewhat in advanced economies. However, it could hardly solve the debt problem on its own and would raise significant challenges and risks. First of all, it may be difficult to create higher inflation, as evidenced by Japan's experience in the last few decades. In addition, un-anchoring of inflation expectations could increase long-term real interest rates, distort resource allocation, reduce economic growth, and hurt the lower-income households. Mode of access: Internet Binder, Ariel. Komatsuzaki, Takuji. IMF Working Papers; Working Paper ; No. 2014/096 Full text available on IMF http://elibrary.imf.org/view/journals/001/2014/096/001.2014.issue-096-en.xml IMF e-Library