An important measure of U.S. fiscal health is the nominal dollar value of public debt owed by the federal government. But a more useful measure is the ratio of the public debt to gross domestic product (GDP), which is simply the federal debt held by the public divided by the U.S. economy. This ratio gives a better sense of the country’s relative debt burden. While an important measure to track, the ratio is also difficult to accurately forecast. In this blog post, we examine the association between inflation and forecast errors of the public debt-to-GDP ratio. We found that forecasters tend to overestimate the future debt-to-GDP ratio during periods of high inflation and underestimate it during periods of low inflation. […]