Ler os Outros: Inflation and Debt (Wonkish) - Paul Krugman

Não perder este post sobre em que Krugman comenta uma caixa do capítulo I do Economic Outrlook da OCDE sobre o efeito da inflação sobre a dívida pública (os negritos são meus):

"the report has a box dismissing the possibility that a higher inflation target, which has been advocated among others by Olivier Blanchard and even Greg Mankiw, could do any good. The report does some arithmetic on the likely reduction in public debt burdens, finding that a sustained increase in inflation by 2 percentage points would be required over a 10-year period to erode the average crisis-induced increase in the debt ratio in the OECD area which the OECD takes as evidence that inflation can’t be a useful response.
So, what’s wrong with this? I see at least three things wrong.

First, the report writes as if a period of 4 percent inflation rather than 2 percent inflation would be a terrible thing, highly disruptive to the economy.

Second — and this is technical but important — the OECD assumes that higher inflation would be reflected one-for-one in higher interest rates. This is a good assumption in normal times — but the whole reason we’re in such a mess is the fact that short-term rates are up against the zero lower bound, that is, that we’re in a liquidity trap. This means that short-term rates would not rise at all for some length of time if we had higher inflation, and that long rates, which reflect expected short rates, should rise less than one for one. In fact, that’s one of the main arguments for higher inflation when you’re facing a zero lower bound: it would reduce real interest rates. So the benefits for the public debt burden would be larger than the estimates suggest.

Third, public debt is not our only problem — in fact, it’s not the core problem. The key problem is, instead, the overhang of private debt. (...) And a period of modestly higher inflation would help reduce that private debt overhang, which would help promote economic recovery, which would in turn raise revenues and help the fiscal situation."