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Time Consistency and Duration of Government Debt: A Model of Quantitative Easing

Author

Listed:
  • Saroj Bhattarai
  • Gauti B Eggertsson
  • Bulat Gafarov

Abstract

This article presents a model of quantitative easing (QE) at the zero lower bound (ZLB) on the short-term nominal interest rate. QE, which reduces the maturity of government debt, is effective at the ZLB because it generates expectations of future monetary expansion in a time-consistent equilibrium. Numerical experiments show that this effect can be substantial.

Suggested Citation

  • Saroj Bhattarai & Gauti B Eggertsson & Bulat Gafarov, 2023. "Time Consistency and Duration of Government Debt: A Model of Quantitative Easing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(4), pages 1759-1799.
    • Handle: RePEc:oup:restud:v:90:y:2023:i:4:p:1759-1799.
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    File URL: http://hdl.handle.net/10.1093/restud/rdac063
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