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Who prevails when fiscal and monetary authorities disagree about the value of public expenditure and how much to discount the future? When the fiscal authority sets debt as its main policy instrument it achieves fiscal dominance, rendering the preferences of the central bank, and thus its...
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In the wake of rising inflation in the aftermath of unprecedented debt financed stimulus packages, we ask: Can … governments use real bonds (TIPS) as part of their debt portfolio to commit to stable inflation rates? We propose a novel … and real assets to use inflation effectively to smooth fiscal policy. When the government cannot commit to future policies …
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