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Inflation Indexation in Public Finances: A Global Dataset on Current Practices
Author: Vybhavi Balasundharam1, Arika Kayastha, and Marcos Poplawski Ribeirohttps://orcid.org/0000-0003-0998-7238
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund
Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 264
Language:
English
Publication Date:
22 Dec 2023
DOI:
https://doi.org/10.5089/9798400261466.001
ISBN:
9798400261466
ISSN:
1018-5941
Pages:
43
Keywords:
Indexation; Inflation; Fiscal Policy; Fiscal Insititutions; inflation Indexation; indexation policy; price level; IMF country desk; impacts of indexation; indexation practice; Social assistance spending; Pensions; Pension spending; Wages; Africa; Global; Europe; Sub-Saharan Africa; Asia and Pacific
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper presents a new global dataset on current practices for four budget items in terms of indexation to the price level and other nominal variables. Compiling data from documents of select multilateral organizations, governments, and related literature as well as conducting a survey among IMF country desks of 190 country-members, we show how indexation is internationally applied in (i) personal income tax brackets; (ii) pensions; (iii) social assistance programs; and (iv) public wages. The dataset shows that while indexation policies vary significantly across economies, some trends can be identified. For example, indexation is more common on pension and social grants than on taxes, and falls with the degree of economic development. We further discuss some applications of this new dataset. Those include an accounting exercise illustrating the impacts of indexation on fiscal outcomes during episodes of inflation surprises; and an analysis of the association between the overall degree of indexation combining the four budget items and inflation persistence.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund