Exit strategies
Ignazio Angeloni (),
Ester Faia and
Roland Winkler ()
European Economic Review, 2014, vol. 70, issue C, 231-257
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.
Keywords: Exit strategies; Debt consolidation; Fiscal policy; Monetary policy; Bank runs (search for similar items in EconPapers)
JEL-codes: E63 G01 H12 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)
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Related works:
Working Paper: Exit strategies (2014) 
Working Paper: Exit Strategies (2011) 
Working Paper: Exit strategies (2011) 
Working Paper: Exit Strategies (2011) 
Working Paper: Exit strategies (2010) 
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:70:y:2014:i:c:p:231-257
DOI: 10.1016/j.euroecorev.2014.04.006
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