Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97133
Authors: 
Angeloni, Ignazio
Faia, Ester
Winkler, Roland
Year of Publication: 
2014
Series/Report no.: 
SAFE Working Paper Series 50
Abstract: 
We study alternative scenarios for exiting the post-crisis fiscal and monetary accommodation using a macromodel where banks choose their capital structure and are subject to runs. Under a Taylor rule, the post-crisis interest rate hits the zero lower bound (ZLB) and remains there for several years. In that condition, pre-announced and fast fiscal consolidations dominate - based on output and inflation performance and bank stability - alternative strategies incorporating various degrees of gradualism and surprise. We also examine an alternative monetary strategy in which the interest rate does not reach the ZLB; the benefits from fiscal consolidation persist, but are more nuanced.
Subjects: 
exit strategies
debt consolidation
fiscal policy
fiscal multipliers
monetary policy
bank runs
JEL: 
G01
E63
H12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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