Monetary Commitment and the Level of Public Debt I

@inproceedings{Gnocchi2016MonetaryCA,
  title={Monetary Commitment and the Level of Public Debt I},
  author={Stefano Gnocchi and Luisa Lambertini},
  year={2016}
}
We analyze the interaction between committed monetary and discretionary fiscal policy in a model with public debt, endogenous government expenditure, distortive taxation, and nominal rigidities. Fiscal decisions lack commitment but are Markov-perfect. Monetary commitment to an interest-rate path leads to a unique level of debt. This level of debt is… CONTINUE READING