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dc.contributor.authorDIAZ-GIMENEZ, Javier
dc.contributor.authorGIOVANNETTI, Giorgia
dc.contributor.authorMARIMON, Ramon
dc.contributor.authorTELES, Pedro
dc.date.accessioned2008-01-09T15:10:54Z
dc.date.available2008-01-09T15:10:54Z
dc.date.issued2007
dc.identifier.issn1830-7728
dc.identifier.urihttp://hdl.handle.net/1814/7729
dc.description.abstractWe characterize the optimal sequential choice of monetary policy in economies with either nominal or indexed debt. In a model where nominal debt is the only source of time inconsistency, the Markov-perfect equilibrium policy implies the progressive depletion of the outstanding stock of debt, until the time inconsistency disappears. There is a resulting welfare loss if debt is nominal rather than indexed. We also analyze the case where monetary policy is time inconsistent even when debt is indexed. In this case, with nominal debt, the sequential optimal policy converges to a time-consistent steady state with positive – or negative – debt, depending on the value of the intertemporal elasticity of substitution. Welfare can be higher if debt is nominal rather than indexed and the level of debt is not too high.en
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.publisherEuropean University Institute
dc.relation.ispartofseriesEUI MWPen
dc.relation.ispartofseries2007/40en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectnominal debten
dc.subjectindexed debten
dc.subjectoptimal monetary policyen
dc.subjecttime consistencyen
dc.subjectMarkov-perfect equilibriumen
dc.titleNominal Debt as a Burden on Monetary Policyen
dc.typeWorking Paperen
dc.neeo.contributorDIAZ-GIMENEZ|Javier|aut|
dc.neeo.contributorGIOVANNETTI|Giorgia|aut|
dc.neeo.contributorMARIMON|Ramon|aut|EUI70009
dc.neeo.contributorTELES|Pedro|aut|
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