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Jeudi 27 Juin 2013

Behzad DIBA (Georgetown University, US)

"Optimal Money and Debt Management : Friedman and Barro Revisited" avec Matthew Canzoneri et Robert Cumby

de 14 h à 15 h 30 en salle S016 à l'INSEE-CREST, 15 Boulevard Gabriel Péri, 92245 MALAKOFF (Métro : Malakoff/Plateau de Vanves (Immeuble "Malakoff 2)).

 Abstract :

How do the fundamental insights of Milton Friedman and Robert Barro fare when we recognize the fact that government bonds provide liquidity services? To answer this question, we extend a standard cash and credit good model by assuming that bonds may be used as collateral in the purchase of some kinds of consumption goods. In the extended model, the government cannot use its liabilities to finance deficits without affecting the amount of liquidity available to support consumption. The insights of Friedman and Barro survive largely intact if the government has an additional debt instrument that is Ricardian — in the sense that its outstanding stock has no direct effect on consumption decisions. In particular, an extended Friedman Rule is optimal when prices are flexible, and when prices are sticky, the Ramsey planner will choose to smooth short run tax distortions at the expense of longer run consumption (when adjusting to, say, an increase in government spending). Absent a Ricardian debt instrument, the planner’s options are much more limited. It would not appear that governments currently have available to them such a debt instrument.