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Modelling Long Bonds - The Case of Optimal Fiscal Policy

Faraglia, Elisa; Marcet, Albert; Scott, Andrew - C.E.P.R. Discussion Papers - 2014

We show how to model portfolio models in the presence of long bonds. Specifically we study optimal fiscal policy under incomplete markets where the government issues bonds of maturity N 1. Assuming the existence of long bonds introduces an additional intertemporal mechanism that makes taxes...

Persistent link: https://www.econbiz.de/10011083295

When the North Last Headed South: Revisiting the 1930s

Reinhart, Carmen M.; Reinhart, Vincent - C.E.P.R. Discussion Papers - 2010

The U.S recession of 2007 to 2009 is unique in the post-World-War-II experience by the broad company it kept. Activity contracted around the world, with the advanced countries of the North experiencing declines in spending normally the purview of the developing economies of the South. The last...

Persistent link: https://www.econbiz.de/10008468628

The Effect of Monetary Policy on Exchange Rates During Currency Crises: The Role of Debt, Institutions and Financial Openness

Eijffinger, Sylvester C W; Goderis, Benedikt - C.E.P.R. Discussion Papers - 2007

This paper examines the effect of monetary policy on the exchange rate during currency crises. Using data for a number of crisis episodes between 1986 and 2004, we find strong evidence that raising the interest rate: (i) has larger adverse balance sheet effects and is therefore less effective in...

Persistent link: https://www.econbiz.de/10005792063

Optimal Monetary and Fiscal Policy in an Economy with Endogenous Public Debt

Luk, Paul; Vines, David - C.E.P.R. Discussion Papers - 2015

This paper uses a New Keynesian framework to study the coordination of fiscal and monetary policies, in response to an inflation shock when the policymaker acts with commitment. We first show that, in the simplest New Keynesian model, fiscal policy plays no part in the optimal policy response,...

Persistent link: https://www.econbiz.de/10011276383

Debt Stabilisation Bias and the Taylor Principle: Optimal Policy in a New Keynesian Model with Government Debt and Inflation Persistence

Stehn, Sven Jari; Vines, David - C.E.P.R. Discussion Papers - 2008

Leith and Wren-Lewis (2007) have shown that government debt is returned to its pre-shock level in a New Keynesian model under optimal discretionary policy. This has two important implications for monetary and fiscal policy. First, in a high-debt economy, it may be optimal for discretionary...

Persistent link: https://www.econbiz.de/10005666963

Simple Rules for the Open Economy: Evaluating Alternative Proposals

Tirelli, Patrizio; Vines, David - C.E.P.R. Discussion Papers - 1991

The paper evaluates some proposals for macroeconomic stabilization in an open economy, which take the form of simple rules. The first rule assigns monetary policy to inflation control and does not require fiscal intervention. The second rule adds fiscal control of a foreign wealth target to the...

Persistent link: https://www.econbiz.de/10005067614

Macroeconomic Shocks and the Business Cycle: Evidence from a Structural Factor Model

Forni, Mario; Gambetti, Luca - C.E.P.R. Discussion Papers - 2010

-shock specification, we identify, using sign restrictions, two non-policy shocks, demand and supply, and two policy shocks, monetary and … fiscal. We obtain the following results. (ii) Both supply and demand shocks are important sources of fluctuations; supply … prevails for GDP, while demand prevails for employment and inflation. (ii) Policy matters: Both monetary and fiscal policy …

Persistent link: https://www.econbiz.de/10008468698

Moral Hazard and Debt Maturity

Huberman, Gur; Repullo, Rafael - C.E.P.R. Discussion Papers - 2014

We present a model of the maturity of a bank's uninsured debt. The bank borrows funds and chooses afterwards the riskiness of its assets. This moral hazard problem leads to an excessive level of risk. Short-term debt may have a disciplining effect on the bank's risk-shifting incentives, but it...

Persistent link: https://www.econbiz.de/10011084392

The Current Global Economic Situation, Outlook and Policy Options, with Special Emphasis on Fiscal Policy Issues

Buiter, Willem H. - C.E.P.R. Discussion Papers - 1987

The paper provides an account of the current global economic situation, outlook and policy options. Medium-term prospects are mediocre and fraught with considerable downside risk. Fiscal and monetary policy options for the main industrial countries to improve global economic performance are...

Persistent link: https://www.econbiz.de/10005791563

Sovereigns, Upstream Capital Flows, and Global Imbalances

Alfaro, Laura; Kalemli-Ozcan, Sebnem; Volosovych, Vadym - C.E.P.R. Discussion Papers - 2011

The paper presents new stylized facts on the direction of capital flows. We find (i) international capital flows net of government debt and/or official aid are positively correlated with growth; (ii) sovereign debt flows are negatively correlated with growth only if debt is financed by another...

Persistent link: https://www.econbiz.de/10009364326

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