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dc.contributor.author Díaz-Giménez, Javier
dc.contributor.author Giovannetti, Giorgia
dc.contributor.author Marimon, Ramon
dc.contributor.author Teles, Pedro
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.accessioned 2020-05-25T09:27:07Z
dc.date.available 2020-05-25T09:27:07Z
dc.date.issued 2003-01-01
dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=841
dc.identifier.uri http://hdl.handle.net/10230/1119
dc.description.abstract We study the effects of nominal debt on the optimal sequential choice of monetary policy. When the stock of debt is nominal, the incentive to generate unanticipated inflation increases the cost of the outstanding debt even if no unanticipated inflation episodes occur in equilibrium. Without full commitment, the optimal sequential policy is to deplete the outstanding stock of debt progressively until these extra costs disappear. Nominal debt is therefore a burden on monetary policy, not only because it must be serviced, but also because it creates a time inconsistency problem that distorts interest rates. The introduction of alternative forms of taxation may lessen this burden, if there is enough commtiment to fiscal policy. If there is full commitment to an optimal fiscal policy, then the resulting monetary policy is the Friedman rule of zero nominal interest rates.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 841
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Nominal debt as a burden on monetary policy
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2020-05-25T09:20:43Z
dc.subject.keyword time-consistency
dc.subject.keyword monetary policy
dc.subject.keyword debt
dc.subject.keyword recursive equilibrium
dc.subject.keyword Macroeconomics and International Economics
dc.rights.accessRights info:eu-repo/semantics/openAccess

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