00000nam 2200000zi 4500 9.903142 CaOODSP 20221107180148 m o d f cr mn||||||||| 210908t20212021onca ob f000 0 eng d CaOODSP eng rda CaOODSP FB3-5/2021-34E-PDF Acharya, Sushant, author. The side effects of safe asset creation / by Sushant Acharya and Keshav Dogra. Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2021. ©2021 1 online resource (iii, 43 pages) : colour illustrations. text txt rdacontent computer c rdamedia online resource cr rdacarrier Staff working paper = Document de travail du personnel, 1701-9397 ; 2021-34 "Last updated: July 14, 2021." Includes bibliographical references (pages 25-28). "We present an incomplete markets model to understand the costs and benefits of increasing government debt when an increased demand for safety pushes the natural rate of interest below zero. A higher demand for safe assets causes the ZLB to bind, increasing unemployment. Higher government debt satiates the demand for safe assets, raising the natural rate and restoring full employment. However, this entails permanently lower investment, which reduces welfare, since our economy is dynamically efficient even when the natural rate is negative. Despite this, increasing debt until the ZLB no longer binds raises welfare when alternative instruments are unavailable. Higher in inflation targets instead allow for negative real interest rates and achieve full employment without reducing investment"--Abstract, page iii. Interest rates Econometric models. Debts, Public Econometric models. Monetary policy Econometric models. Taux d'intérêt Modèles économétriques. Dettes publiques Modèles économétriques. Politique monétaire Modèles économétriques. Bank of Canada, issuing body. Staff working paper (Bank of Canada) 2021-34. (CaOODSP)9.806221 PDF 3.02 MB https://publications.gc.ca/collections/collection_2021/banque-bank-canada/FB3-5-2021-34-eng.pdf