Bacchetta, Philippe; van Wincoop, Eric; Perazzi, Elena - National Bureau of Economic Research (NBER) - 2015
This paper examines quantitatively the potential for monetary policy to avoid self-fulfilling sovereign debt crises. We … model. We consider both conventional and unconventional monetary policy. Under conventional policy the central bank can … avert a crisis require excessive inflation for a sustained period of time. Unconventional monetary policy can only be …