Monetary-Fiscal Interactions and the Euro Area's Malaise / Marek Jarociński, Bartosz Maćkowiak.

Format:

Book

Author/Creator:

Jarociński, Marek.

Contributor:

National Bureau of Economic Research.

Maćkowiak, Bartosz.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23746.

NBER working paper series no. w23746

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

When monetary and fiscal policy are conducted as in the euro area, output, inflation, and government bond default premia are indeterminate according to a standard general equilibrium model with sticky prices extended to include defaultable public debt. With sunspots, the model mimics the recent euro area data. We specify an alternative configuration of monetary and fiscal policy, with a non-defaultable eurobond. If this policy arrangement had been in place since the onset of the Great Recession, output could have been much higher than in the data with inflation in line with the ECB's objective.

Notes:

Print version record

August 2017.