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Monetary-fiscal policy interactions in public debt consolidation: the role of fiscal rules and inflation targeting

This paper examines how the interactions of monetary and fiscal policy affect the consolidation of public debt. Using data across 86 countries from 1982 to 2021 and a debt decomposition framework, we find that the adoption of inflation targeting significantly strengthens the role of primary surplus on debt consolidation, whereas the joint implementation of fiscal rules and inflation targeting further increases the contribution of primary surplus in debt consolidation while weakening the contribution of inflation. […]