Angeletos, Georges Marios, Collard, Fabrice and Dellas, Harris (2020) Public Debt as Private Liquidity: Optimal Policy. TSE Working Paper, n. 11-1170, Toulouse

Warning
There is a more recent version of this item available.
[thumbnail of wp_tse_1170.pdf]
Preview
Text
Download (775kB) | Preview

Abstract

We study optimal policy in an economy in which public debt is used as collateral or liquidity buffer. Issuing more public debt raises welfare by easing the underlying financial friction; but this easing lowers the liquidity premium and increases the government’s cost of borrowing. These considerations, which are absent in the basic Ramsey paradigm, help pin down a unique, long-run level of public debt. They require a front-loaded tax response to government-spending shocks, instead of tax smoothing. And they explain why a financial recession, more than a traditional one, makes government borrowing cheaper, optimally supporting larger fiscal stimuli.

Item Type: Monograph (Working Paper)
Language: English
Date: 22 November 2020
Place of Publication: Toulouse
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 08 Dec 2020 14:17
Last Modified: 04 Apr 2023 11:28
OAI Identifier: oai:tse-fr.eu:124957
URI: https://publications.ut-capitole.fr/id/eprint/41960

Available Versions of this Item

View Item

Downloads

Downloads per month over past year