Arbeitspapier

Monetary Policy under a Fiscal Theory of Sovereign Default

zu Verbundenen Objekten

This paper examines equilibrium determination under different monetary policy regimes when the government might default on its debt. We apply a cash-in-advance model where the government does not have access to non-distortionary taxation and does not account for initial outstanding debt when it sets the income tax rate. Solvency is then not guaranteed and sovereign default can affect the return on public debt. If the central bank sets the interest rate in a conventional way, the equilibrium allocation cannot be determined. If, instead, money supply is controlled, the equilibrium allocation can uniquely be determined.

Sprache
Englisch

Erschienen in
Series: Tinbergen Institute Discussion Paper ; No. 09-093/2

Klassifikation
Wirtschaft
Price Level; Inflation; Deflation
Monetary Policy
Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
Thema
Equilibrium determination
interest rate policy
money supply
public debt
sovereign default
Zinspolitik
Geldmenge
Öffentliche Schulden
Liquidität
Cash-in-Advance-Restriktion
Theorie

Ereignis
Geistige Schöpfung
(wer)
Schabert, Andreas
Ereignis
Veröffentlichung
(wer)
Tinbergen Institute
(wo)
Amsterdam and Rotterdam
(wann)
2009

Handle
Letzte Aktualisierung
10.03.2025, 11:41 MEZ

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Schabert, Andreas
  • Tinbergen Institute

Entstanden

  • 2009

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