bis -Fiscal sources of inflation risk in EMDEs - the role of the external channel-此为英文文档.docx

BISWorkingPapersNo1110

FiscalsourcesofinflationriskinEMDEs:theroleoftheexternalchannel

byRyanBanerjee,ValerieBoctor,AaronMehrotraandFabrizioZampolli

MonetaryandEconomicDepartment

July2023

JELclassification:E31;E52;E62;E63.

Keywords:Fiscaldeficit,inflation,exchangeratedepreciation,sovereignrisk,emergingmarketanddevelopingeconomies,originalsin,inflationtargeting.

ThispaperwasproducedaspartoftheBISConsultativeCouncilfortheAmericas(CCA)researchconferenceonStructuralchangesininflationandoutputdynamicsafterCovidandothershocks,heldinMexicoCityon17–18November2022.BISWorkingPapersarewrittenbymembersoftheMonetaryandEconomicDepartmentoftheBankforInternationalSettlements,andfromtimetotimebyothereconomists,andarepublishedbytheBank.Thepapersareonsubjectsoftopicalinterestandaretechnicalincharacter.TheviewsexpressedinthemarethoseoftheirauthorsandnotnecessarilytheviewsoftheBIS.

ThispublicationisavailableontheBISwebsite().

?BankforInternationalSettlements2023.Allrightsreserved.Briefexcerptsmaybereproducedortranslatedprovidedthesourceisstated.

ISSN1020-0959(print)

ISSN1682-7678(online)

FiscalsourcesofinflationriskinEMDEs:theroleoftheexternalchannel*

RyanBanerjeetValerieBoctor?AaronMehrotra§FabrizioZampolli?

June14,2023

Abstract

Weexaminehowchangesinfiscaldeficitsaffectnear-termfutureinflationinapanelofemergingmarketanddevelopingeconomies(EMDEs).Usinganovelmethodforquantilepanelregressionswithfixedeffects,wefindthatanincreaseinthefiscaldeficithashighlynon-lineareffectsoninflation-thatis,alargerimpactonupsidetailrisksthanonaverageinflation.TheseeffectsaresubstantiallylargerinEMDEsthaninadvancedeconomies.Wethenshowthatanincreaseinthefiscaldeficitraisestheriskoffuturecurr