Monetary and Fiscal Policy in Times of Crises
Coordinator: Prof. Dr. Andreas Schabert
Participants: Dr. Falko Jüßen, Dipl.-Vw. Joost Röttger
This project aims at analyzing monetary and fiscal policy in the aftermath of the subprime crisis that has led monetary and fiscal policy makers in industrialized countries to conduct policy beyond well-explored terrain. Monetary policy rates are held close to the zero lower bound and central banks aimed at easing the monetary stance in a quantitative way. At the same time, fiscal spending has boosted public debt and raised fears of sovereign default in several countries. These developments and the effects of monetary and fiscal policy can hardly be understood by applying pre-2008 state-of-the-art macroeconomic models.
This project’s contribution is to develop macroeconomic models that account for these extraordinary circumstances, like interest rates at the zero lower bound, excessive liquidity demand, or high credit default probabilities, and to use them to analyze the effectiveness of policies recently implemented by several countries, e.g. the impact of unconventional monetary policy, like quantitative and credit easing, on real activity and prices.
- Hoermann, M., and A. Schabert (2013): „A Monetary Analysis of Balance Sheet Policies”, The Economic Journal, forthcoming, http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12167/pdf.
- Juessen, F., L. Linnemann, and A. Schabert (2013): „Default Risk Premia on Government Bonds in a Quantitative Macroeconomic Model”, Macroeconomic Dynamics, forthcoming.
- Bredemeier, C., F. Juessen and A. Schabert (2014): „Revisiting Fiscal Policy at Zero Policy Rates”, Center for Macroeconomic Research, Working Paper,
- Christoffel, K., and A. Schabert (2014): “Interest Rates, Money, and Banks in an Estimated Euro Area Model”, Center for Macroeconomic Research, Working Paper,
- Juessen, F., and Schabert, A. (2013): “Fiscal Policy, Sovereign Default, and Bailouts “, University of Cologne, Working Paper Series in Economics 67.
- Roettger, J. (2014): “Monetary and Fiscal Policy with Sovereign Default”, University of Cologne, Working Paper Series in Economics, No. 74.
- Schabert, A. (2014): “Optimal Monetary Policy, Asset Purchases, and Credit Market Frictions, University of Cologne, ECB Working Paper Series, forthcoming.