Chafwehé, Boris; Oikonomou, Rigas; Priftis, Romanos; … - 2021 - Last updated: January 26, 2021
We propose a framework of optimal monetary policy where debt sustainability may, or may not, be a relevant constraint for the central bank. We show analytically that in each environment the optimal interest rate path consists of a Taylor rule augmented with forward guidance terms. These terms...