Exit strategies

Ignazio Angeloni (), Ester Faia and Roland Winkler ()

No 50, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We study alternative scenarios for exiting the post-crisis fiscal and monetary accommodation using a macromodel where banks choose their capital structure and are subject to runs. Under a Taylor rule, the post-crisis interest rate hits the zero lower bound (ZLB) and remains there for several years. In that condition, pre-announced and fast fiscal consolidations dominate - based on output and inflation performance and bank stability - alternative strategies incorporating various degrees of gradualism and surprise. We also examine an alternative monetary strategy in which the interest rate does not reach the ZLB; the benefits from fiscal consolidation persist, but are more nuanced.

Keywords: exit strategies; debt consolidation; fiscal policy; fiscal multipliers; monetary policy; bank runs (search for similar items in EconPapers)
JEL-codes: E63 G01 H12 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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https://www.econstor.eu/bitstream/10419/97133/1/786065605.pdf (application/pdf)

Related works:
Journal Article: Exit strategies (2014)
Working Paper: Exit Strategies (2011)
Working Paper: Exit strategies (2011)
Working Paper: Exit Strategies (2011)
Working Paper: Exit strategies (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:50

DOI: 10.2139/ssrn.2437326

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