Optimal Public Debt Management and Liquidity Provision
We study the Ramsey policy problem in an economy in which firms face a collateral constraint. Issuing more public debt alleviates this friction by increasing the aggregate quantity of collateral. In so doing, however, the issuance of more debt also raises interest rates, which in turn increases the...
Main Authors: | , , , |
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Format: | Working Paper |
Published: |
Cambridge, MA: Department of Economics, Massachusetts Institute of Technology
2013
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Subjects: | |
Online Access: | http://hdl.handle.net/1721.1/76742 |