How to Fight Deflation in a Liquidity Trap High quality books
How to Fight Deflation in a Liquidity Trap
By:Mr. Gauti B. Eggertsson
Published on 2003-03-01 by International Monetary Fund
I model deflation, at zero nominal interest rate, in a microfounded general equilibrium model. I show that deflation can be analyzed as a credibility problem if the government has only one policy instrument, money supply carried out by means of open market operations in short-term bonds, and cannot commit to future policies. I propose several policies to solve the credibility problem. They involve printing money or nominal debt and either (1) cutting taxes, (2) buying real assets such as stocks, or (3) purchasing foreign exchange. The government credibly |commits to being irresponsible| by using these policy instruments. It commits to higher money supply in the future so that the private sector expects inflation instead of deflation. This is optimal, since it curbs deflation and increases output by lowering the real rate of return.
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Book which was published by International Monetary Fund since 2003-03-01 have ISBNs, ISBN 13 Code is 9781451895209 and ISBN 10 Code is 1451895208
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