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Blanchard (2005) suggested that active interest rate policy might induce unstable dynamics in highly-indebted economies. We examine this in a dynamic general equilibrium model where Calvo-type price rigidities provide a rationale for inflation stabilization. Unstable dynamics can occur when the...
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This book investigates the reasons for persistent public deficits and delayed fiscal reform in Japan, placing a special … emphasis on political economy aspects. Japan is confronted with the need to pursue fiscal discipline for fiscal consolidation …
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Depression ; expectations ; deflation ; zero bound ; liquidity trap …
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