00000nam 2200000zi 4500 9.895724 CaOODSP 20221107174117 m o d f cr cn||||||||| 210127e20210126onca ob f000 0 eng d CaOODSP eng rda CaOODSP n-us--- FB3-5/2021-5E-PDF Chafwehé, Boris, author. (Optimal) monetary policy with and without debt / by Boris Chafwehé, Rigas Oikonomou, Romanos Priftis and Lukas Vogel. Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, January 26, 2021. ©2021 1 online resource (ii, 57 pages) : colour illustrations. text txt rdacontent computer c rdamedia online resource cr rdacarrier Staff working paper = Document de travail du personnel, 1701-9397 ; 2021-5 Includes bibliographical references (pages 43-45). "We propose a framework of optimal monetary policy where debt sustainability may, or may not, be a relevant constraint for the central bank. We show analytically that in each environment the optimal interest rate path consists of a Taylor rule augmented with forward guidance terms. These terms arise either i) from "twisting interest rates" when the central bank ensures debt sustainability, or ii) under no debt concerns, from committing to keep interest rates low at the exit of the liquidity trap. The optimal policy is isomorphic to Leeper's (1991) "passive monetary/active fiscal policy" regime in the first instance, or "active monetary/passive fiscal policy" regime in the second. We insert our framework into a standard medium scale DSGE model calibrated to the US. Optimal passive monetary policy with debt concerns is ineffective in stabilizing inflation, whereas under no debt concerns, monetary policy is very effective in stabilizing the macroeconomy"--Abstract, page ii. Monetary policy United States Econometric models. Debts, Public United States Econometric models. Politique monétaire États-Unis Modèles économétriques. Dettes publiques États-Unis Modèles économétriques. Bank of Canada, issuing body. Staff working paper (Bank of Canada) 2021-5. (CaOODSP)9.806221 PDF 2.15 MB https://publications.gc.ca/collections/collection_2021/banque-bank-canada/FB3-5-2021-5-eng.pdf