Impact of Public Debt, Cashless Transactions on Inflation in Emerging Market Economies: Evidence from the COVID-19 Period

Abstract

ABSTRACT This study empirically analyzes the impact of public debt and cashless transactions on inflation in emerging market economies during the COVID-19 pandemic. Our research question is primarily motivated by the extensive fiscal spending and cashless transactions in these economies during the pandemic and the inflation spike in the mid of 2021. We use monthly data from 10 sample emerging market economies and panel vector auto-regressive models for analysis. Our findings show that (1) public debt has a positive impact on the inflation rate in the EMEs, and (2) cashless transaction exhibits a positive effect on overall inflation. (3) Further, cashless transactions and public debt are found to have a positive and significant impact on inflation in specific sectors such as Clothes and Footwear, Energy, and Transport.