Debt and Monetary Policy: The Policy Issues

Rüdiger Dornbusch

Chapter 1 in The Debt Burden and its Consequences for Monetary Policy, 1998, pp 3-27 from Palgrave Macmillan

Abstract: Abstract This paper explores issues in the relation of debt and monetary policy. Deficits are large, debts are rising absolutely and relative to GDP, unfunded liabilities greatly add to the explicit stock of debt. Debt (and deficits) play a special role at present, in the run up to Maastricht: the membership hurdle in terms of debts and deficits is hardly met by anyone. Debt is important in this context because large debts are seen as a threat to the integrity of the new European money or, at least, a serious complication and potential political pressure point in the exercise of sound monetary policy. But debt is also of interest in a less dramatic context from the simple question of what role it plays in the transmission mechanism of monetary policy.

Keywords: Interest Rate; Monetary Policy; Central Bank; Fiscal Policy; Real Interest Rate (search for similar items in EconPapers)
Date: 1998
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Working Paper: Debt and Monetary Policy: The Policy Issues (1996)
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DOI: 10.1007/978-1-349-26077-5_1

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