Abstract: In this paper, we analyze the importance of inflation-indexation of a part of the stock of government debt. We establish empirically using both Local Projections and a narratively identified specific fiscal shock that sovereign deficit shocks are more inflationary when the share of government-issued inflation-indexed debt is higher. We leverage this finding to introduce inflation-indexed debt in macroeconomic models focusing on interactions of fiscal and monetary policy through policy rules, where we show that: (i) even absent further frictions, inflation-indexed debt makes the price level backward-looking (i.e., it becomes a jump-state variable), (ii) it tightens bounds that pin down 'active fiscal policy', (iii) it allows us to discriminate to some degree between 'fiscally-led' mechanisms and 'HANK-type' mechanisms surpassing Ricardian equivalence, and (iv) in a calibrated HANK model, a one percentage point increase in the share of inflation-indexed debt in overall government debt increases the volatility of the response of inflation to government spending by 3% relative to a no-indexed debt baseline case in a world of fiscal dominance, while there is no sizable effect under monetary dominance.