Publication:
Nominal Debt as a Burden on Monetary Policy

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorDíaz-Giménez, Javieres
dc.contributor.authorTeles, Pedroes
dc.contributor.authorGiovannetti, Giorgia
dc.contributor.authorMarimon, Ramón
dc.date.accessioned2014-05-27T10:21:05Z
dc.date.available2014-05-27T10:21:05Z
dc.date.issued2008
dc.description.abstractWe characterize the optimal sequential choice of monetary policy in economies with either nominal or indexed debt. In a model where nominal debt is the only source of time inconsistency, the Markov-perfect equilibrium policy implies the progressive depletion of the outstanding stock of debt, until the time inconsistency disappears. There is a resulting welfare loss if debt is nominal rather than indexed. We also analyze the case where monetary policy is time inconsistent even when debt is indexed. In this case, with nominal debt, the sequential optimal policy converges to a time-consistent steady state with positive—or negative—debt, depending on the value of the intertemporal elasticity of substitution. Welfare can be higher if debt is nominal rather than indexed and the level of debt is not too high.en
dc.description.statusPublicadoes
dc.format.mimetypeapplication/pdf
dc.identifier.bibliographicCitationReview of Economic Dynamics, (2008), 11 (3), p. 493-514en
dc.identifier.doi10.1016/j.red.2007.11.002
dc.identifier.issn1094-2025
dc.identifier.publicationfirstpage493
dc.identifier.publicationissue3
dc.identifier.publicationlastpage514
dc.identifier.publicationtitleReview of Economic Dynamicsen
dc.identifier.publicationvolume11
dc.identifier.urihttps://hdl.handle.net/10016/4962
dc.language.isoengen
dc.publisherElsevieren
dc.relation.publisherversionhttp://dx.doi.org/10.1016/j.red.2007.11.002
dc.rights© 2007 Elsevier Inc.en
dc.rights.accessRightsopen accessen
dc.subject.ecienciaEconomíaes
dc.subject.otherNominal debten
dc.subject.otherIndexed debten
dc.subject.otherOptimal monetary policyen
dc.subject.otherTime consistencyen
dc.subject.otherMarkov-perfect equilibriumen
dc.titleNominal Debt as a Burden on Monetary Policyen
dc.typeresearch article*
dc.type.hasVersionAM*
dc.type.reviewPeerRevieweden
dspace.entity.typePublication
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