Arbeitspapier
The side effects of safe asset creation
We present an incomplete markets model to understand the costs and benefits of increasing government debt when an increased demand for safety pushes the natural rate of interest below zero. A higher demand for safe assets causes the ZLB to bind, increasing unemployment. Higher government debt satiates the demand for safe assets, raising the natural rate and restoring full employment. However, this entails permanently lower investment, which reduces welfare, since our economy is dynamically efficient even when the natural rate is negative. Despite this, increasing debt until the ZLB no longer binds raises welfare when alternative instruments are unavailable. Higher in inflation targets instead allow for negative real interest rates and achieve full employment without reducing investment.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Staff Working Paper ; No. 2021-34
- Klassifikation
-
Wirtschaft
- Thema
-
Monetary policy implementation
Fiscal policy
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Acharya, Sushant
Dogra, Keshav
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2021
- DOI
-
doi:10.34989/swp-2021-34
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Acharya, Sushant
- Dogra, Keshav
- Bank of Canada
Entstanden
- 2021
Ähnliche Objekte (12)
Asset-liability management: An overview
The side effects of safe asset creation
Extreme downside risk in asset returns
Optimal taxation in asset markets with adverse selection
Evaluating the effects of forward guidance and large-scale asset purchases
Endogenously segmented asset market in an inventory theoretic model of money demand
Fragility of resale markets for securitized assets and policy of asset purchases
Search frictions and asset price volatility
Blockchain-based settlement for asset trading
International Spillovers of Large-Scale Asset Purchases
Fourier Inversion Formulas for Multiple-Asset Option Pricing
Interbank asset-liability networks with fire sale management
Asset-liability management: An overview
The side effects of safe asset creation
Extreme downside risk in asset returns
Optimal taxation in asset markets with adverse selection
Evaluating the effects of forward guidance and large-scale asset purchases
Endogenously segmented asset market in an inventory theoretic model of money demand
Fragility of resale markets for securitized assets and policy of asset purchases
Search frictions and asset price volatility
Blockchain-based settlement for asset trading
International Spillovers of Large-Scale Asset Purchases
Fourier Inversion Formulas for Multiple-Asset Option Pricing
Interbank asset-liability networks with fire sale management
Asset-liability management: An overview
The side effects of safe asset creation
Extreme downside risk in asset returns
Optimal taxation in asset markets with adverse selection
Evaluating the effects of forward guidance and large-scale asset purchases
Endogenously segmented asset market in an inventory theoretic model of money demand
Fragility of resale markets for securitized assets and policy of asset purchases
Search frictions and asset price volatility
Blockchain-based settlement for asset trading
International Spillovers of Large-Scale Asset Purchases
Fourier Inversion Formulas for Multiple-Asset Option Pricing