Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/45899 
Year of Publication: 
2011
Series/Report no.: 
Kiel Working Paper No. 1676
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
We study alternative scenarios for exiting the post-crisis fiscal and monetary accommodation using the model of Angeloni and Faia (2010), that combines a standard DSGE framework with a fragile banking sector, suitably modified and calibrated for the euro area. Credibly announced and fast fiscal consolidations dominate - based on simple criteria - alternative strategies incorporating various degrees of gradualism and surprise. The fiscal adjustment should be based on spending cuts or else be relatively skewed towards consumption taxes. The phasing out of monetary accommodation should be simultaneous or slightly delayed. We also find that, contrary to widespread belief, Basel III may well have an expansionary macroeconomic effect.
Subjects: 
Exit strategies
debt consolidation
fiscal policy
monetary policy
capital requirements
bank runs
JEL: 
G01
E63
H12
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.