@techreport{Palacio-Vera2011Quantitative,
abstract = {The main purpose of this study is to explore the potential expansionary effect stemming from the monetization of debt. We develop a simple macroeconomic model with Keynesian features and four sectors: creditor households, debtor households, businesses, and the public sector. We show that such expansionary effect stems mainly from a reduction in the financial cost of servicing the public debt. The efficacy of the channel that allegedly operates through the compression of the risk/term premium on securities is found to be ambiguous. Finally, we show that a country that issues its own currency can avoid becoming stuck in a structural liquidity trap, provided its central bank is willing to monetize the debt created by a strong enough fiscal expansion.},
address = {Annandale-on-Hudson, NY},
author = {Alfonso Palacio-Vera},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {E10; E12; E44; E52; E58; 330; floor system; debt monetization; functional finance; policy coordination; neutral interest rate},
language = {eng},
number = {685},
publisher = {Levy Economics Inst.},
title = {Quantitative easing, functional finance, and the "neutral" interest rate},
type = {Working paper, Levy Economics Institute},
url = {http://hdl.handle.net/10419/57066},
year = {2011}
}
