CONVENTIONAL MONETARY POLICY IN OLG MODELS: REVISITING THE ASSET-SUBSTITUTION CHANNEL

• 成果类型: Article
• 署名作者: Hu, Guanliang; Ma, Guoxuan; Qiao, Wei; Wallace, Neil
• 署名单位: City University of Hong Kong; University of International Business & Economics; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12618
• 发表日期: 2023
• 页码: 875-892
• 关键词: debt

摘要

Conventional monetary policy involves actions by the monetary and fiscal authorities: the former sets a nominal interest rate and the latter sets lump-sum taxes to finance the implied flow of interest payments on government debt. We model such policy within an overlapping generations framework and show that absent any other frictions the magnitude of the nominal interest rate gives rise to asset substitution between government debt and either private debt or capital-substitution that has both real and nominal effects. Such substitution is not in standard New Keynesian models because their dynastic specification implies that government debt is not net wealth.