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Transfers vs Credit Policy: Macroeconomic Policy Trade-offs during Covid-19 / Saki Bigio, Mengbo Zhang, Eduardo Zilberman.
- Format:
- Book
- Author/Creator:
- Bigio, Saki.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27118.
- NBER working paper series no. w27118
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- The Covid-19 crisis has lead to a reduction in the demand and supply of sectors that produce goods that need social interaction to be produced or consumed. We interpret the Covid-19 shock as a shock that reduces utility stemming from "social" goods in a two-sector economy with incomplete markets. We compare the advantages of lump-sum transfers versus a credit policy. For the same path of government debt, transfers are preferable when debt limits are tight, whereas credit policy is preferable when they are slack. A credit policy has the advantage of targeting fiscal resources toward agents that matter most for stabilizing demand. We illustrate this result with a calibrated model. We discuss various shortcomings and possible extensions to the model.
- Notes:
- Print version record
- May 2020.
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