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The Dire Effects of the Lack of Monetary and Fiscal Coordination

Listed author(s):
  • Leonardo Melosi

    (Federal Reserve Bank of Chicago)

  • Francesco Bianchi

    (Duke University)

We study the problem of coordination between the monetary and the fiscal authorities at the zero lower bound. Lack of coordination between the monetary and fiscal authorities can lead to an explosive dynamics of inflation and large output losses. Policy makers can achieve the goal of mitigating the recession without giving up on long-run macroeconomic stability by committing to inflate away only the portion of debt resulting from an unusually large recession.

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File URL: https://economicdynamics.org/meetpapers/2017/paper_110.pdf
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Paper provided by Society for Economic Dynamics in its series 2017 Meeting Papers with number 110.

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Date of creation: 2017
Handle: RePEc:red:sed017:110
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  17. repec:nbr:nberch:13968 is not listed on IDEAS
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