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    Optimal monetary and fiscal policy rules, welfare gains and exogenous shocks in an economy with default risk

    Okano, E. and Eguchi, M. (2019) Optimal monetary and fiscal policy rules, welfare gains and exogenous shocks in an economy with default risk. Working Paper. Birkbeck, University of London, London, UK.

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    Abstract

    We develop a class of dynamic stochastic general equilibrium models with nominal rigidities and we introduce default risk in the model. We find that if productivity changes are observed, policy authorities should be aware of default risk, although being aware of such risk is not very important following government expenditure changes. Welfare gains from awareness of default risk are nonnegligible if productivity changes, although welfare gains from awareness of default risk are tiny following government expenditure changes.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: BCAM Working Paper Series 1902. ISSN 1745-8587
    Keyword(s) / Subject(s): Sovereign Risk, Optimal Monetary Policy, Fiscal Theory of the Price Level
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Administrator
    Date Deposited: 24 Jul 2019 12:08
    Last Modified: 05 Aug 2019 12:08
    URI: http://eprints.bbk.ac.uk/id/eprint/28257

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