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Optimal fiscal and monetary policy, debt crisis and management /
The initial government debt-to-GDP ratio and the government's commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidatio...
| Clasificación: | Libro Electrónico |
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| Autor principal: | |
| Formato: | Electrónico eBook |
| Idioma: | Inglés |
| Publicado: |
[Washington, D.C.] :
International Monetary Fund,
[2017]
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| Colección: | IMF working paper ;
WP/17/78. |
| Temas: | |
| Acceso en línea: | Texto completo |
| Sumario: | The initial government debt-to-GDP ratio and the government's commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidation is very slow. A faster pace is optimal when the economy starts from a high level of public debt implying high sovereign risk premia, unless these are suppressed via a bailout by official creditors. Under discretion, the cost of not being able to commit is reflected into a quick consolidation of government debt. Simple monetary-fiscal rules with passive fiscal policy, designed for an environment with "normal shocks", perform reasonably well in mimicking the Ramsey-optimal response to one-off government debt shocks. When the government can issue also long-term bonds-under commitment-the optimal debt consolidation pace is slower than in the case of short-term bonds only, and entails an increase in the ratio between long and short-term bonds. |
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| Notas: | 6 Negative preference shock with an interest rate peg of various lengths7 Effects of a shock to the level of debt under optimal and time-consistent policy, and under each of the four debt scenarios, allowing for long-term government debt. |
| Descripción Física: | 1 online resource (45 pages) |
| ISBN: | 9781475590227 1475590229 |