Credible Commitment to Optimal Escape from a Liquidity Trap : The Role of the Balance Sheet of an Independent Central Bank

The Role of the Balance Sheet of an Independent Central Bank

Credible Commitment to Optimal Escape from a Liquidity Trap : The Role of the Balance Sheet of an Independent Central Bank
An independent central bank can manage its balance sheet and its capital so as to commit itself to a depreciation of its currency and an exchange rate peg. This way, the central bank can implement the optimal escape from a liquidity trap, which involves a commitment to higher future inflation. This commitment mechanism works even though,... READ MORE...

Publication date: September 2004
ISBN 9781451857900
$15.00

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