The Effectiveness of Government Debt for Demand Management: Sensitivity to Monetary Policy Rules

Arbeitspapier

We construct a staggered-price dynamic general equilibrium model with overlapping generations based on uncertain lifetimes. Price stickiness plus lack of Ricardian Equivalence could be expected to make an increase in government debt, with associated changes in lumpsum taxation, effective in raising short-run output. However we find this is very sensitive to the monetary policy rule. A permanent increase in debt under a basic Taylor Rule does not raise output. To make debt effective we need either a temporary nominal interest rate peg; or inertia in the rule; or an exogenous money supply policy; or to make the debt increase temporary.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Quaderni di Dipartimento ; No. 133

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Fiscal Policy ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
• Thema: staggered prices ; overlapping generations ; government debt ; fiscal policy effectiveness ; monetary policy rules

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Ascari, Guido ; Rankin, Neil
• Ereignis: Veröffentlichung
• (wer): Università degli Studi di Pavia, Dipartimento di Economia Politica e Metodi Quantitativi (EPMQ)
• (wo): Pavia
• (wann): 2010

Weitere Informationen

• Handle: http://hdl.handle.net/10419/95331
• Letzte Aktualisierung: 12.07.2024, 13:21 MESZ