Economics, Econometrics and Finance
4 years ago

Debt stabilization in monetary policy leads to suboptimal economic outcomes.

RePEc: Research Papers in Economics
Optimal monetary policy and fiscal interactions in a non-Ricardian economy
Massimiliano Rigon, Francesco Zanetti

Paper Summary

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The article explores how to best manage money and government spending in an economy where people don't live forever. It suggests that focusing on stabilizing debt can help make sure everyone has a more even chance to spend money. However, this approach may not be as good as just keeping inflation and output steady while letting debt change based on how much people want to buy.