Related papers: The public debt multiplier
I study the economic effects of testing during the outbreak of a novel disease. I propose a model where testing permits isolation of the infected and provides agents with information about the prevalence and lethality of the disease.…
Consider the problem of a government that wants to reduce the debt-to-GDP (gross domestic product) ratio of a country. The government aims at choosing a debt reduction policy which minimises the total expected cost of having debt, plus the…
We solve an infinite time-horizon bounded-variation stochastic control problem with regime switching between $N$ states. This is motivated by the problem of a government that wants to control the country's debt-to-GDP (gross domestic…
Understanding consumption dynamics and its impact on the whole economy and welfare within the present economic crisis is not an easy task. Indeed the level of consumer demand for different goods varies with the prices, consumer incomes and…
The deep financial turmoil in China caused by the COVID-19 pandemic has exacerbated fiscal shocks and soaring public debt levels, which raises concerns about the stability and sustainability of China's public debt growth in the future. This…
How does the monetary and fiscal policy mix alter households' saving incentives? To answer these questions, we build a heterogenous agents New Keynesian model where three different types of agents can save in assets with different liquidity…
Compound interest as well as inflation grows exponentially with time, whereas other means to repay debt grow polynomially. For this and other, mostly political, reasons, debt without inflation is unsustainable. We suggest a discontinuous…
Japan's population is shrinking, the share of working-age people is falling, and the number of elderly is growing fast. These trends squeeze public finances from both sides--fewer people paying taxes and more people drawing on pensions and…
This paper analyses the impact of credit expansions arising from decreases in collateral requirements or more expansionary monetary policies on long-term productivity in a model with endogenous growth. Credit expansions associated with…
We show that a simple and intuitive three-parameter equation fits remarkably well the evolution of the gross domestic product (GDP) in current and constant dollars of many countries during times of recession and recovery. We then argue that…
The price multiplier effect provides precious insight into the behavior of investors during episodes of speculative trading. It tells us that the higher the price of an asset is (within a set of similar assets) the more its price is likely…
We replicate Meissner (2016), where debt aversion was reported for the first time in an intertemporal consumption and saving problem. While Meissner (2016) uses a German sample, our participants are US undergraduate students. All of the…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
This paper investigates whether a financial system can be made more stable if financial institutions share risk by exchanging contingent convertible (CoCo) debt obligations. The question is framed in a financial network model of debt and…
This paper presents a model that studies the impact of credit expansions arising from increases in collateral values or lower interest rate policies on long-run productivity and economic growth in a two-sector endogenous growth economy,…
In the recent times of global Covid pandemic, the Federal Reserve has raised the concerns of upsurges in prices. Given the complexity of interaction between inflation and inequality, we examine whether the impact of inflation on inequality…
This paper investigates the impact of Social Discount Rate (SDR) choice on intergenerational equity issues caused by Public-Private Partnerships (PPPs) projects. Indeed, more PPPs mean more debt being accumulated for future generations…
This paper studies how a large increase in the price level is transmitted to the real economy through firm balance sheets. Using newly digitized macro- and micro-level data from the German inflation of 1919-1923, we show that inflation led…
Debt aversion can have severe adverse effects on financial decision-making. We propose a model of debt aversion, and design an experiment involving real debt and saving contracts, to elicit and jointly estimate debt aversion with…
The 2008 global financial crisis marked the beginning of a decade dominated by fiscal austerity policies in much of the developed world. This paper presents a qualitative narrative review of an extensive collection of academic literature to…