In the new special issue of Public Sector Economics on inflation and public finances in the 2020s, selected articles analyse different aspects of inflation related to taxation, public expenditure, and fiscal policy in both advanced and emerging market economies. One common message of these contributions is that inflation has significant implications for the design of tax and benefit systems, as well as for fiscal positions and their macroeconomic impacts. 

Dubravko Mihaljek opens this issue with the article "Inflation and public finances: an overview” which analyses how inflation affects fiscal outcomes and identifies the potential sources and consequences of fiscal instability in a high-inflation environment.

Orsetta Causa, Emilia Soldani, Nhung Luu and Chiara Soriolo analyse distributional consequences for OECD countries in the article “A cost-of-living squeeze? Distributional implications of rising inflation”. Drawing on national micro-based household budget surveys, they estimate that the declines in household purchasing power between August 2021 and August 2022 ranged from 3% in Japan to 18% in Czechia.

In the article “Short- and medium-term fiscal positions in a high-inflation environment: the case of Croatia”, Frane Banić, Dominik Ivan Pripužić and Pave Rebić add inflation shocks to standard fiscal reaction functions – an approach that was not considered in macro-fiscal research during the long period of moderate inflation.

In the article “A nexus between fiscal policy and inflation: a case study of Indonesia using SVAR model”, Julie Ann Basconcillo analyses how public spending affected inflation and personal consumption in Indonesia over the past two decades.

András Simonovits in the article “Unexpected inflation and public pensions: the case of Hungary” analyses the effects of different inflation indexation schemes and evaluates the impact of accelerating inflation on the decision to delay retirement.

Michael Christl, Ilias Livanos, Andrea Papini and Alberto Tumino in the article “The future of taxation in changing labour markets” provide a first assessment of the fiscal and distributional consequences of the ongoing structural changes in the labour markets of EU member states, mostly driven by technological progress and ageing.

Nora Mustać reviews a book “Emerging European economies after the pandemic: stuck in the middle income trap?” edited by László Mátyás.