Public debt, inflation, and the Fiscal Theory of Price Level in emerging markets: the case of Paraguay

This paper investigates the link between public debt and inflation considering Fiscal Theory of Price Level (FTPL) with data from Paraguay. Unlike other studies, also considers this relationship according to monetary regime. The fiscal policy actions are evaluated in a structural vector autoregressive combined variables interpreted using impulse responses. results highlight importance differentiating regime while conducting analysis. In aggregate an active policy, higher shocks produce inflationary pressures. Conversely, targeting sample estimation, follows its targeted path.