Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/175696
Authors: 
Jarociński, Marek
Maćkowiak, Bartosz
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 2072
Abstract: 
When monetary and fiscal policy are conducted as in the euro area, output, inflation, and government bond default premia are indeterminate according to a standard general equilibrium model with sticky prices extended to include defaultable public debt. With sunspots, the model mimics the recent euro area data. We specify an alternative configuration of monetary and fiscal policy, with a non-defaultable eurobond. If this policy arrangement had been in place since the onset of the Great Recession, output could have been much higher than in the data with inflation in line with the ECB's objective.
Subjects: 
self-fulfilling expectations
zero lower bound
fiscal theory of the price level
eurobond
JEL: 
E31
E32
E63
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2794-9
Document Type: 
Working Paper
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