Search results for "Zero lower bound"
showing 3 items of 3 documents
Debt Sustainability and Fiscal Space in a Heterogeneous Monetary Union: Normal Times Vs the Zero Lower Bound
2020
In this paper we study fiscal policy effects and fiscal space for countries in a monetary union with different levels of public debt. We develop a dynamic stochastic general equilibrium (DSGE) model of a two-country monetary union, calibrated to match the characteristics of Spain and Germany, in which debt sustainability is endogenously determined a la Bi (2012) to shape the responses of the risk premium on public debt. Policy shocks change the market’s expectation about future primary surplus, producing a direct effect on the sovereign risk premium and macroeconomic responses of the economy. In normal times the costs of a government spending driven fiscal consolidation in the high-debt cou…
Deciphering the Macroeconomic Effects of Internal Devaluations in a Monetary Union
2020
We study the macroeconomic effects of internal devaluations undertaken by a periphery of countries belonging to a monetary union. We find that internal devaluations have large and positive output effects in the long run. Through an expectations channel, most of these effects carry over to the short run. Internal devaluations focused on goods markets reforms are generally more powerful in stimulating growth than reforms aimed at moderating wages, but the latter are less deflationary. For a monetary union with a periphery the size of the euro area's, the countries at the periphery benefit from internal devaluations even at the zero lower bound (ZLB) of the nominal interest rate. Nevertheless,…
Effects of unconventional monetary policy on income and wealth distribution: Evidence from United States and Eurozone
2019
As an answer to the “Great Recession” and Zero Lower Bound problem, main central banks had to use unconventional monetary policy (UMP). This research focuses on the distributive effects of these measures on household income and household wealth in the United States of America (USA) and the Eurozone. For this purpose, this paper presents four models that were constructed using the Structural Vector Autoregressive methodology (SVAR). The results suggest that the UMPs applied by the Federal Reserve (FED) in the USA could increase wealth and income inequality through the portfolio channel. However, the same results were not observed in the Eurozone. Key words: United States of America, Eurozone…