Search Results
Showing results 1 to 2 of approximately 2.
(refine search)
Working Paper
Monetary and Fiscal Policies in Times of Large Debt: Unity is Strength
The COVID pandemic hit the US economy at a time in which the ability of policymakers to react to adverse shocks is greatly limited. The current low interest rate environment limits the Federal Reserve's ability to stabilize the economy, while the large public debt curtails the efficacy of fiscal interventions by inducing expectations of costly fiscal adjustments. A solution to this impasse is a coordinated fiscal and monetary strategy aiming at creating a controlled rise of inflation to wear away a targeted fraction of debt. Under our coordinated strategy, the fiscal authority introduces an ...
Working Paper
Monetary and Fiscal Policies in Times of Large Debt: Unity is Strength
The Covid-19 pandemic found policymakers facing constraints on their ability to react to an exceptionally large negative shock. The current low interest rate environment limits the tools the central bank can use to stabilize the economy, while the large public debt curtails the efficacy of fiscal interventions by inducing expectations of costly fiscal adjustments. Against this background, we study the implications of a coordinated fiscal and monetary strategy aimed at creating a controlled rise of inflation to wear away a targeted fraction of debt. Under this coordinated strategy, the fiscal ...