The cost of capital, asset prices, and the effects of monetary policy

Ghossoub, Edgar A.; Reed, Robert R.

doi:10.1016/j.jmacro.2014.08.004

Journal of Macroeconomics

2014

DOI: 10.1016/j.jmacro.2014.08.004

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The cost of capital, asset prices, and the effects of monetary policy

Edgar A. Ghossoub

Robert R. Reed

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2019

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“…Further extensions are undertaken by assuming variations in structural parameters (Gomis‐Porqueras, ), various types of private banking systems (Matsuoka, ; Paal, Smith, & Wang, ), the presence of banking crisis (Antinolfi & Keister, ), multiple production sectors (Ghossoub & Reed, ), changing demand for cash (Ghossoub & Reed, ; Schreft & Smith, ), the US dollar as a choice of storage value (Antinolfi, Landeo, & Nikitin, ), and allocation of capital and workers (Ghossoub & Reed, ).…”

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Fiscal rules in a monetary economy: Implications for growth and welfare

Ono

2019

J Public Economic Theory

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This study considers two fiscal rules, a debt rule that controls the debt‐to‐gross domestic product (GDP) ratio, and an expenditure rule that controls the expenditure‐to‐GDP ratio, in a monetary growth model with financial intermediation. Tightening of fiscal rules promotes economic growth and thus, benefits future generations. However, there could be two equilibria of the nominal interest rates, and the welfare effects of the rules on the current generation are different between the two equilibria. In particular, the effects of a decreased debt‐to‐GDP ratio depend on its initial ratio; a high (low)‐ratio country has no incentive (an incentive) to reduce the ratio further from the viewpoint of the current generation's welfare. This result provides an explanation for difficulties with fiscal reform in countries with already high debt‐to‐GDP ratios.

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confidence: 99%

Fiscal rules in a monetary economy: Implications for growth and welfare

Ono

2019

J Public Economic Theory

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The cost of capital, asset prices, and the effects of monetary policy

Cited by 1 publication

References 49 publications

Fiscal rules in a monetary economy: Implications for growth and welfare

Fiscal rules in a monetary economy: Implications for growth and welfare

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