Transfers Plus Open-Market Purchases: a Remedy for Recession
AbstractThis paper simulates the use of transfers to households plus central-bank open-market purchases to generate a recovery of a low-interest-rate economy from a negative demand shock. Transfers to households are automatically triggered in recession; the prescribed anti-recession transfer ratio is proportional to the unemployment gap. Three alternative complementary monetary policies that the Federal Reserve might decide to implement are considered: standard, moderate, and aggressive. The simulations suggest that transfers plus open market purchases are likely to be an effective remedy for such a recession while limiting potential adverse impacts on inflation and government debt held by the non-central-bank public.
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Bibliographic InfoPaper provided by University of Delaware, Department of Economics in its series Working Papers with number 04-02.
Length: 34 pages
Date of creation: 2004
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-29 (All new papers)
- NEP-CBA-2005-09-29 (Central Banking)
- NEP-CMP-2005-09-29 (Computational Economics)
- NEP-MAC-2005-09-29 (Macroeconomics)
- NEP-MON-2005-09-29 (Monetary Economics)
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