Lack of confidence, the zero lower bound, and the virtue of fiscal rules
In: Journal of economic dynamics & control, Band 70, S. 36-53
ISSN: 0165-1889
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In: Journal of economic dynamics & control, Band 70, S. 36-53
ISSN: 0165-1889
In the presence of the zero lower bound, standard business cycle models with a Taylor-type monetary policy rule are prone to equilibrium multiplicity. A drop in confidence can drive the economy into a liquidity trap without any change in fundamentals. Using a prototypical sticky-price model, I show that Ricardian fiscal spending rules that prevent real marginal costs from declining in the face of a confidence shock insulate the economy from such expectations-driven liquidity traps.
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In: ECB Working Paper No. 1795
SSRN
I show that the zero nominal interest rate bound may render it desirable for society to appoint a fiscally activist policy-maker who cares less about the stabilisation of government spending relative to inflation and output gap stabilisation than the private sector does. I work with a simple New Keynesian model where the government has to decide each period afresh about the optimal level of public consumption and the one period nominal interest rate. A fiscally activist policy-maker uses government spending more aggressively to stabilise inflation and the output gap in a liquidity trap than an authority with preferences identical to those of society as a whole would do. The appointment of an activist policy-maker corrects for discretionary authorities' disregard of the expectations channel, thereby reducing the welfare costs associated with zero bound events.
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In: American political science review, Band 108, Heft 4, S. 817-829
ISSN: 1537-5943
Recent years have seen an increasing interest among international relations scholars in applications of pragmatist thought. Few works, however, have gone beyond discussing the epistemological and methodological implications of pragmatism. This article draws on a pragmatist understanding of human action to develop a novel explanation of norm change in contexts not amenable to more common analytical approaches. Specifically, concepts derived from pragmatism help explain how the creative recombination of practices by actors in response to changes in the material and social context of action can transform largely tacit notions of appropriate behavior. The article demonstrates the value of the approach by explaining the origin of a common contemporary security practice unknown prior to the Second World War and incompatible with the then-prevailing norms of sovereignty: the long-term, peacetime presence of one state's military on the territory of another equally sovereign state.
In: ECB Working Paper No. 1653
SSRN
Working paper
In: American political science review, Band 108, Heft 4, S. 817-829
ISSN: 0003-0554
I characterize optimal monetary and fiscal policy in a stochastic New Keynesian model when nominal interest rates may occasionally hit the zero lower bound. The benevolent policymaker controls the short-term nominal interest rate and the level of government spending. Under discretionary policy, accounting for fiscal stabilization policy eliminates to a large extent the welfare losses associated with the presence of the zero bound. Under commitment, the gains associated with the use of the fiscal policy tool remain modest, even though fiscal stabilization policy is part of the optimal policy mix.
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I characterize optimal monetary and fiscal policy in a stochastic New Keynesian model when nominal interest rates may occasionally hit the zero lower bound. The benevolent policymaker controls the short-term nominal interest rate and the level of government spending. Under discretionary policy, accounting for fiscal stabilization policy eliminates to a large extent the welfare losses associated with the presence of the zero bound. Under commitment, the gains associated with the use of the fiscal policy tool remain modest, even though fiscal stabilization policy is part of the optimal policy mix.
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In: International studies quarterly: the journal of the International Studies Association, Band 55, Heft 3, S. 601-624
ISSN: 0020-8833, 1079-1760
In: International studies quarterly: the journal of the International Studies Association, Band 55, Heft 3, S. 601-623
ISSN: 1468-2478
In: Archiv für Kulturgeschichte, Band 89, Heft 2, S. 283-300
ISSN: 2194-3958
In: Wirtschaftswissenschaft
In: Perspectives on politics, Band 21, Heft 3, S. 1135-1137
ISSN: 1541-0986