Charles de Beauffort

IRES

will give a presentation on:

Fiscal and monetary policy interactions in a liquidity trap when government debt matters

Abstract:

What does Central Bank independence imply for government debt management in a liquidity trap? To provide an answer, I study a stochastic noncooperative game between fiscal and monetary policy when demand shocks occasionally trigger zero bound episodes on the nominal rate. When government debt is short-term, the optimal time-consistent response implies a decrease in debt and a fiscal stimulus financed with labor taxes, a result which differs qualitatively from the coordinated outcome. The reason is the “leaning against the wind” policy of the Central Bank which makes expected future tax cuts stimulative for current consumption. Increasing the debt maturity allows to coordinate somewhat uncoordinated policies.

1. Indicate on Doodle by Tuesday 20th of October at 12:00, using your full name, whether you will be joining the conference (https://doodle.com/poll/hkai8gi9gucimb85) 2. If you are not a member of CORE BrownBag team on Microsoft Teams, write us an email. You will receive an invitation email to join the team immediately after. 3. The interface of Teams is very similar to Skype. When the presenter starts the videoconference, you will see in the team page the button "join". Just press it and you will be inside the video conference. 4. By the start of the seminar, you should mute your microphone. This should be done to avoid echoing noise problems. Whenever you want to intervene, just write in the chat that you want to do so. The presenter will stop, you can unmute yourself and intervene. 5. Keep your webcam on!