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Crisis and Commitment: Inflation Credibility and the Vulnerability to Sovereign Debt Crises

Aguiar, Mark; Amador, Manuel; Farhi, Emmanuel; … - National Bureau of Economic Research (NBER) - 2013

We propose a continuous time model of nominal debt and investigate the role of inflation credibility in the potential for self-fulfilling debt crises. Inflation is costly, but reduces the real value of outstanding debt without the full punishment of default. With high inflation credibility,...

Persistent link: https://www.econbiz.de/10010951477

Escaping the Great Recession

Bianchi, Francesco; Melosi, Leonardo - National Bureau of Economic Research (NBER) - 2014

We show that policy uncertainty about how the rising public debt will be stabilized empirically accounts for the lack of deflation in the US economy during the zero-lower-bound period. Announcing fiscal austerity is detrimental in the short run, but it preserves macroeconomic stability. On the...

Persistent link: https://www.econbiz.de/10011269066

Prudential Policy for Peggers

Schmitt-Grohé, Stephanie Schmitt-Grohe; Uribe, Martin - National Bureau of Economic Research (NBER) - 2012

This paper shows that in a small open economy model with downward nominal wage rigidity pegging the nominal exchange rate creates a negative pecuniary externality. This peg-induced externality is shown to cause unemployment, overborrowing, and depressed levels of consumption. The paper...

Persistent link: https://www.econbiz.de/10011271471

Inflation Implications of Rising Government Debt

Giannitsarou, Chryssi; Scott, Andrew - National Bureau of Economic Research (NBER) - 2006

The intertemporal budget constraint of the government implies a relationship between a ratio of current liabilities to the primary deficit with future values of inflation, interest rates, GDP and narrow money growth and changes in the primary deficit. This relationship defines a natural measure...

Persistent link: https://www.econbiz.de/10005085300

Perceptions and Misperceptions of Fiscal Inflation

Leeper, Eric; Walker, Todd B. - National Bureau of Economic Research (NBER) - 2012

The Great Recession and worldwide financial crisis have exploded fiscal imbalances and brought fiscal policy and inflation to the forefront of policy concerns. Those concerns will only grow as aging populations increase demands on government expenditures in coming decades. It is widely perceived...

Persistent link: https://www.econbiz.de/10009654186

Uncertain Fiscal Consolidations

Leeper, Eric; Bi, Huixin; Leith, Campbell B. - National Bureau of Economic Research (NBER) - 2012

The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition are uncertain. Drawing on the evidence in Alesina and Ardagna (2010), we emphasize whether or not the fiscal consolidation is driven by tax rises or expenditure cuts. We find that the...

Persistent link: https://www.econbiz.de/10009493268

Industry Evidence on the Effects of Government Spending

Ramey, Valerie Ann; Nekarda, Christopher J. - National Bureau of Economic Research (NBER) - 2010

This paper investigates industry-level effects of government purchases in order to shed light on the transmission mechanism for government spending on the aggregate economy. We begin by highlighting the different theoretical predictions concerning the effects of government spending on industry...

Persistent link: https://www.econbiz.de/10008634689

Monetary-Fiscal Policy Interactions and Fiscal Stimulus

Davig, Troy; Leeper, Eric - National Bureau of Economic Research (NBER) - 2009

Increases in government spending trigger substitution effects--both inter- and intra-temporal--and a wealth effect. The ultimate impacts on the economy hinge on current and expected monetary and fiscal policy behavior. Studies that impose active monetary policy and passive fiscal policy...

Persistent link: https://www.econbiz.de/10005040646

Deflation: Prevention and Cure

Buiter, Willem Hendrik - National Bureau of Economic Research (NBER) - 2003

After an absence of almost half a century, the spectre of deflation is once again haunting the corridors of central banks and finance ministries in the industrial world. While preventing or combating deflation poses some unique difficulties not present in preventing or combating inflation,...

Persistent link: https://www.econbiz.de/10005829427

Monetary-Fiscal Policy Interactions and the Price Level: Background and Beyond

Leeper, Eric; Yun, Tack - National Bureau of Economic Research (NBER) - 2005

The paper presents the fiscal theory of the price level in a variety of models, including endowment economies with lump …-sum taxes and production economies with proportional income taxes. We offer a microeconomic perspective on the fiscal theory by … level. Under certain assumptions on monetary and fiscal behavior, the revaluation effect reflects the fiscal theory …

Persistent link: https://www.econbiz.de/10005049984

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