scholarly journals Dealing with a Liquidity Trap When Government Debt Matters: Optimal Time-Consistent Monetary and Fiscal Policy

2013 ◽  
Author(s):  
Matthias Burgert ◽  
Sebastian Schmidt
Keyword(s):  
Fiscal Policy ◽  
Government Debt ◽  
Optimal Time ◽  
Liquidity Trap ◽  
Monetary And Fiscal Policy

Optimal Monetary and Fiscal Policy in a Liquidity Trap [with Comments]

2004 ◽  
Vol 2004 (1) ◽  
pp. 75-144
Author(s):  
Gauti B. Eggertsson ◽  
Michael Woodford ◽  
Tor Einarsson ◽  
Eric M. Leeper
Keyword(s):  
Fiscal Policy ◽  
Liquidity Trap ◽  
Monetary And Fiscal Policy

scholarly journals Optimal Time-Consistent Government Debt Maturity*

2016 ◽  
Vol 132 (1) ◽  
pp. 55-102 ◽  
Author(s):  
Davide Debortoli ◽  
Ricardo Nunes ◽  
Pierre Yared
Keyword(s):  
Fiscal Policy ◽  
Government Debt ◽  
Debt Maturity ◽  
Optimal Time ◽  
Ex Post ◽  
Maturity Structure ◽  
The Government ◽  
Lack Of Commitment ◽  
The Cost

Abstract This article develops a model of optimal government debt maturity in which the government cannot issue state-contingent bonds and cannot commit to fiscal policy. If the government can perfectly commit, it fully insulates the economy against government spending shocks by purchasing short-term assets and issuing long-term debt. These positions are quantitatively very large relative to GDP and do not need to be actively managed by the government. Our main result is that these conclusions are not robust to the introduction of lack of commitment. Under lack of commitment, large and tilted debt positions are very expensive to finance ex ante since they exacerbate the problem of lack of commitment ex post. In contrast, a flat maturity structure minimizes the cost of lack of commitment, though it also limits insurance and increases the volatility of fiscal policy distortions. We show that the optimal time-consistent maturity structure is nearly flat because reducing average borrowing costs is quantitatively more important for welfare than reducing fiscal policy volatility. Thus, under lack of commitment, the government actively manages its debt positions and can approximate optimal policy by confining its debt instruments to consols.

scholarly journals PERHITUNGAN TINGKAT UTANG MAKSIMAL PEMERINTAH SEBAGAI ACUAN BAGI KEBIJAKAN MONETER DI INDONESIA

2013 ◽  
Vol 2 (1) ◽  
pp. 81
Author(s):  
Doni Satria
Keyword(s):  
Fiscal Policy ◽  
Government Debt ◽  
Stabilization Policy ◽  
Government Budget ◽  
Macroeconomic Stabilization ◽  
Indonesian Government ◽  
Dominance Condition ◽  
Fiscal Dominance ◽  
The Government ◽  
Monetary And Fiscal Policy

The interaction of monetary and fiscal policy in an economy played an important role for macroeconomic stabilization policy. Blanchard (1990) has shown the fiscal domination condition in this policy interaction, fiscal dominance condition could be caused by the accumulation of government debt. This research analyzed the maximum debt that can be accumulated by the government, and still be sustained and could not drag the economy to the fiscal dominance condition. Using the Mendoza and Oviedo (2004) model, we find the maximum accumulated government debt is 45.2 percent of Indonesia GDP. This result is based on the 20 percent of expenditure adjustment of Indonesian government budget

Six Essays in Persuasion

2017 ◽  
Author(s):  
Thomas J. Sargent
Keyword(s):  
United States ◽  
Fiscal Policy ◽  
Inflation Rate ◽  
Government Debt ◽  
The United States ◽  
Budget Constraint ◽  
Government Expenditures ◽  
The Future ◽  
Monetary And Fiscal Policy ◽  
The U.S

This chapter consists of six essays that use “unpleasant monetarist arithmetic” to interpret events during the 1980s and 1990s in Brazil and the United States. During the 1980s, the United States took steps along a path upon which Brazil had travelled much further, a path along which interest-bearing government debt is growing as a percentage of GNP. The U.S. government was able readily to borrow large amounts, and had far to go before the government's budget constraint threatened to impose painful choices among the options of raising taxes, lowering government expenditures, or printing currency. Brazil found its ability to borrow very limited, and therefore had to confront those painful choices immediately. One essay emphasizes that a country's inflation rate at any moment emerges out of the sustained monetary and fiscal policy that it chooses, now and in the future.

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