Template-Type: ReDIF-Paper 1.0
Author-Name: Christopher Johns
Author-X-Name-First: Christopher
Author-X-Name-Last: Johns
Author-Name: Aaron Mehrotra
Author-X-Name-First: Aaron
Author-X-Name-Last: Mehrotra
Author-Name: Fabrizio Zampolli
Author-X-Name-First: Fabrizio
Author-X-Name-Last: Zampolli
Title: Public debt and monetary policy transmission: evidence from advanced and emerging Europe
Abstract: Using high-frequency euro area monetary policy shocks and panel local projections for the period 2001-2020, this paper examines how macroeconomic variables respond based on the level and the maturity structure of public debt. The results show that public debt plays a significant role in influencing monetary policy transmission. Higher public debt is associated with a weaker response of prices and inflation expectations to tighter monetary policy, while output declines at least as much as in low-debt economies. The maturity structure of debt also matters in a non-linear way: debt at intermediate maturities is associated with weaker effects, whereas debt at very short and long maturities is associated with stronger effects. Fiscal responses indicate a lack of contemporaneous fiscal backing, as primary balances tend to deteriorate following monetary tightening. Finally, for non-euro area European economies, the paper introduces a novel dataset on public debt maturity profiles and shows that spillovers from euro area monetary policy depend on the maturity structure in the receiving economy.
Creation-Date: 2026-06
File-URL: https://www.bis.org/publ/work1365.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1365.htm
File-Format: text/html
Number: 1365
Keywords: monetary policy transmission, government debt, debt maturity, policy spillovers
Classification-JEL: E31, E52, E62, E63
Handle: RePEc:bis:biswps:1365