Fiscal hedging with nominal assets

We analyze optimal fiscal and monetary policy in an economy with distortionary labor income taxes, nominal rigidities, nominal debt of various maturities and short-selling constraints. Optimal policy prescribes the almost exclusive use of long term debt. Such debt mitigates the distortions associated with hedging fiscal shocks by allowing the government to allocate them efficiently across states and periods.

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Year of publication:	2008
Authors:	Lustig, Hanno ; Sleet, Christopher ; Yeltekin, Sevin
Published in:	Journal of Monetary Economics. - Elsevier, ISSN 0304-3932. - Vol. 55.2008, 4, p. 710-727
Publisher:	Elsevier

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005131812