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is contrasted with a reference policy which would be first best in a frictionless economy. Results are: the Ramsey policy …
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rate policy, will destabilize the economy if the feedback from debt surprises back to the primary surplus is too weak. This …
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open the economy is. If the government cannot borrow from abroad in its own currency, stability requires interest rate …
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, which justifies tight debt constraints. In particular, a balanced budget policy stabilizes the economy under cost …
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This paper examines the role of the monetary instrument choice for local equilibrium determinacy under sticky prices and different fiscal policy regimes. Corresponding to Benhabib et al.'s (2001) results for interest rate feedback rules, the money growth rate should not rise by more than one for...
Persistent link: https://www.econbiz.de/10011348705
We present a simple macroeconomic model with open market operations that allows examining the effects of quantitative and credit easing. The central bank controls the policy rate, i.e. the price of money in open market operations, as well as the amount and the type of assets that are accepted as...
Persistent link: https://www.econbiz.de/10011382672
This paper examines the pricing of public debt in a quantitative macroeconomic model with government default risk. Default may occur due to a fiscal policy that does not preclude a Ponzi game. When a build-up of public debt makes this outcome inevitable, households stop lending such that the...
Persistent link: https://www.econbiz.de/10011379436
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