Inflation Indexation in Public Finances: A Global Dataset on Current Practices

By Vybhavi Balasundharam, Arika Kayastha, Marcos Poplawski Ribeiro

December 22, 2023

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Vybhavi Balasundharam, Arika Kayastha, and Marcos Poplawski Ribeiro. Inflation Indexation in Public Finances: A Global Dataset on Current Practices, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Disclaimer: 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.

Summary

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.

Subject: Expenditure, Labor, Prices

Keywords: Africa, Asia and Pacific, Europe, Fiscal Insititutions, Fiscal Policy, Global, IMF country desk, Impacts of indexation, Indexation, Indexation policy, Indexation practice, Inflation, Inflation Indexation, Pension spending, Pensions, Price level, Social assistance spending, Sub-Saharan Africa, Wages

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/264
Stock No:

WPIEA2023264
ISBN:

9798400261466
ISSN:

1018-5941

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