We re-examine optimal monetary policy when lump-sum taxes are unavailable. Under commitment, we show that, with alternative utility functions to that considered in Nicolini’s related analysis, the direction of the incentive to cheat may depend on the initial level of government debt, with low debt creating an incentive towards surprise deflation, but high debt the reverse. Under discretion, we ...

During the …nancial crisis and its aftermath, those segments of the economy most exposed to the accumulation of mortgage debt have tended to fare the worst. Whether it is by industry (construction), by geography (sand states), or by household (the most indebted), the presence of greater mortgage debt has led to weaker economic outcomes (see for example, Mian and Su…, 2009, and Dynan, 2012). Mor...

The role of movements in real rates in explaining the relationship between longand short-term interest rates is explored within a model of optimal government debt management. The government's incentives to resort in the future to in ̄ation and ex post debt taxation in order to reduce the real value of its nominal liabilities have an impact on term premia and hence on the short±long spread. In pa...