How Do Inflation Shocks Affect Public Debt Dynamics?

August 2, 2023  

By Oscar Valencia, Juliana gamboa and Gustavo Sanchez. 

The COVID-19 pandemic had a very large impact on government finances. As governments saw their revenues reduced and their expenditures increased to cope with the health and social emergencies, the public debt rapidly mounted. By the end of 2020, the debt-to-GDP ratios had increased by 10 percentage points (pp) compared to pre pandemic levels in the average emerging economies. 

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