ECB working paper finds indebted countries should pursue austerity at ZLB
Governments that are borrowing at above a sustainable level should approach a liquidity trap with a small stimulus followed by spending cuts, all the while pursuing expansionary monetary policy, according to a working paper published today by the European Central Bank (ECB).
In Dealing with a Liquidity Trap when Government Debt Matters: Optimal Time-Consistent Monetary and Fiscal Policy, Matthias Burgert of the European Commission and the Institute for Monetary and Financial Stability in
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