Hidden Bibliographic Details
| ISBN: | 9781475590227
1475590229
1475590229
1475590180
9781475590180
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| Notes: | 6 Negative preference shock with an interest rate peg of various lengths7 Effects of a shock to the level of debt under optimal and time-consistent policy, and under each of the four debt scenarios, allowing for long-term government debt.
Print version record.
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| Summary: | The initial government debt-to-GDP ratio and the government's commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidation is very slow. A faster pace is optimal when the economy starts from a high level of public debt implying high sovereign risk premia, unless these are suppressed via a bailout by official creditors. Under discretion, the cost of not being able to commit is reflected into a quick consolidation of government debt. Simple monetary-fiscal rules with passive fiscal policy, designed for an environment with "normal shocks", perform reasonably well in mimicking the Ramsey-optimal response to one-off government debt shocks. When the government can issue also long-term bonds-under commitment-the optimal debt consolidation pace is slower than in the case of short-term bonds only, and entails an increase in the ratio between long and short-term bonds.
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| Other form: | Print version: Cantore, Cristiano. Optimal Fiscal and Monetary Policy, Debt Crisis and Management. Washington, D.C. : International Monetary Fund, ©2017 9781475590180
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| Standard no.: | 10.5089/9781475590180.001
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