Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146971
Authors: 
Leão, Pedro
Year of Publication: 
2015
Series/Report no.: 
Working Paper, Levy Economics Institute 843
Abstract: 
This paper has two main objectives. The first is to propose a policy architecture that can prevent a very high public debt from resulting in a high tax burden, a government default, or inflation. The second objective is to show that government deficits do not face a financing problem. After these deficits are initially financed through the net creation of base money, the private sector necessarily realizes savings, in the form of either government bond purchases or, if a default is feared, 'acquisitions' of new money.
Subjects: 
Fiscal Policy
Functional Finance
Modern Monetary Theory
Monetary Policy
Public Debt Sustainability
Zero Interest Rates
JEL: 
E12
E42
E52
E62
E63
Document Type: 
Working Paper

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