This article discusses a form of fiscal monetization that produces losses in the central bank's balance sheet, without a permanent increase in the money base. If an independent central bank acts as a long-sighted policymaker, an optimal helicopter monetary policy can be identified. At the same...

We develop a new class of general equilibrium models with partially unfunded debt to propose a fiscal theory of trend inflation. In response to business cycle shocks, the monetary authority controls inflation, and the fiscal authority stabilizes debt. However, the central bank accommodates...

Goods producers increase their capital expenditure and employment in response to a cut in marginal corporate income tax rates or an increase in investment tax credits. In contrast, companies in the service sector mostly use any tax windfall to increase dividend payouts. We base our conclusions...

In a model with costly financial intermediation and financial disturbances, credit subsidies are desirable, irrespective of how they are financed. They are especially useful when the zero lower bound constraint is reached. They are superior to other credit policies such as direct lending.

We propose a regime-switching approach to deal with the lower bound on nominal interest rates in dynamic term structure modelling. In the "lower bound regime", the short term rate is expected to remain constant at levels close to the effective lower bound; in the "normal regime", the short rate...

Both monetary policy and real factors played crucial causal roles in the housing boom and bust. Monetary policy distorted relative prices, particularly intertemporal prices. Prices play a critical role in allocating resources by signaling the relative scarcity of resources. Prices convey...

This post will explore at length (warning!) and in detail (another warning — wonk alert!) the MMT perspective on the debt ratio and fiscal sustainability. While the approach suggests a macroeconomic policy mix and strategies for both fiscal and monetary policies that most neoclassical...

In a model with costly financial intermediation and financial disturbances, credit subsidies are desirable, irrespective of how they are financed. They are especially useful when the zero lower bound constraint is reached. They are superior to other credit policies such as direct lending

Modern Monetary Theory has lately received much attention but also a fair amount of criticisms. The intention of this paper is to review the main arguments in contention to assess the validity of the arguments put forward and the limitations of its policies. Modern Monetary Theory questions...