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Working Paper
Redistribution and the Monetary–Fiscal Policy Mix
Yang, Choongryul; Bhattarai, Saroj; Lee, Jae Won (2021-03-01)
We show that the effectiveness of redistribution policy in stimulating the economy and improving welfare is directly tied to how much inflation it generates, which in turn hinges on monetary-fiscal adjustments that ultimately finance the transfers. We compare two distinct types of monetary-fiscal adjustments: In the monetary regime, the government eventually raises taxes to finance transfers, while in the fiscal regime, inflation rises, effectively imposing inflation taxes on public debt holders. We show analytically in a simple model how the fiscal regime generates larger and more persistent ...
Finance and Economics Discussion Series , Paper 2021-013

Report
The Monetary and Fiscal History of Brazil, 1960-2016
Kehoe, Patrick J.; Ayres, Joao Luiz; Guillen, Diogo; Garcia, Marcio (2018-12-20)
Brazil has had a long period of high inflation. It peaked around 100 percent per year in 1964, decreased until the first oil shock (1973), but accelerated again afterward, reaching levels above 100 percent on average between 1980 and 1994. This last period coincided with severe balance of payments problems and economic stagnation that followed the external debt crisis in the early 1980s. We show that the high-inflation period (1960-1994) was characterized by a combination of fiscal deficits, passive monetary policy, and constraints on debt financing. The transition to the low-inflation period ...
Staff Report , Paper 575

Working Paper
The Bank Lending Channel Is Back
Spiegel, Mark M. (2025-02-11)
The period following the global financial crisis was marked by low interest rates and low responsiveness of bank lending to monetary policy. This led some to conclude that the bank lending channel for monetary policy to influence economic activity had weakened. This paper revisits the responsiveness of the bank lending channel using a bank-level panel of US Call Report data and updated measures of U.S. monetary policy shocks. Results indicate that the efficacy of the bank lending channel increased over our sample period. We find tepid responses in bank lending to monetary shocks from 2012H1 ...
Working Paper Series , Paper 2025-04

Working Paper
Persistent Effects of the Paycheck Protection Program and the PPPLF on Small Business Lending
Dufresne, Lora; Spiegel, Mark M. (2024-08-07)
Using bank-level U.S. Call Report data, we examine the longer-term effects of the Paycheck Protection Program (PPP) and the PPP Liquidity Facility on small business (SME) lending. Our sample runs through the end of 2023H1, by which time almost all PPP loans were forgiven or repaid. To identify a causal impact of program participation, we instrument based on historical bank relationships with the Small Business Administration and the Federal Reserve discount window prior to the onset of the pandemic. Elevated bank participation in both programs was positively associated with a substantial ...
Working Paper Series , Paper 2024-26

Working Paper
Shocks, Frictions, and Policy Regimes: Understanding Inflation after the COVID-19 Pandemic
Doh, Taeyoung; Yang, Choongryul (2023-12-22)
We set- up a two-sector New Keynesian model with input-output linkages to study the persistently high inflation during the post-COVID-19 period. We include multiple shocks as well as several amplification channels of these shocks in a parsimonious model to quantify the relative importance of each factor. We calibrate the model to match the pre-COVID-19 data and alter parameters governing 1) the fiscal rule, 2) inflation feedback in the monetary policy rule, 3) elasticity of substitution among intermediary inputs in production, and 4) the size of a sectoral demand shift shock to explain the ...
Research Working Paper , Paper RWP 23-16

Working Paper
Optimal monetary and fiscal policy at the zero lower bound in a small open economy
Egorov, Konstantin; Bhattarai, Saroj (2016-01-01)
We investigate open economy dimensions of optimal monetary and fiscal policy at the zero lower bound (ZLB) in a small open economy model. At positive interest rates, the trade elasticity has negligible effects on optimal policy. In contrast, at the ZLB, the trade elasticity plays a key role in optimal policy prescriptions. The way in which the trade elasticity shapes policy depends on the government's ability to commit. Under discretion, the increase in government spending at the ZLB depends critically on the trade elasticity. Under commitment, the difference between future and current ...
Globalization Institute Working Papers , Paper 260

Working Paper
Inflation dynamics: the role of public debt and policy regimes
Lee, Jae Won; Bhattarai, Saroj; Park, Woong Yong (2012)
We investigate the roles of a time-varying inflation target and monetary and fiscal policy stances on the dynamics of inflation in a DSGE model. Under an active monetary and passive fiscal policy regime, inflation closely follows the path of the inflation target and a stronger reaction of monetary policy to inflation decreases the equilibrium response of inflation to non-policy shocks. In sharp contrast, under an active fiscal and passive monetary policy regime, inflation moves in an opposite direction from the inflation target and a stronger reaction of monetary policy to inflation increases ...
Globalization Institute Working Papers , Paper 124

Working Paper
The Dire Effects of the Lack of Monetary and Fiscal Coordination
Melosi, Leonardo; Bianchi, Francesco (2017-07-06)
What happens if the government?s willingness to stabilize a large stock of debt is waning, while the central bank is adamant about preventing a rise in inflation? The large fiscal imbalance brings about inflationary pressures, triggering a monetary tightening, further debt accumulation, and additional inflationary pressure. Thus, the economy will go through a spiral of higher inflation, output contraction, and further debt accumulation. A coordinated commitment to inflate away the portion of debt resulting from a large recession leads to better macroeconomic outcomes by separating the issue ...
Working Paper Series , Paper WP-2017-19

Working Paper
What Drives U.S. Treasury Re-use?
Infante, Sebastian; Saravay, Zack (2021-08-24)
We study what drives the re-use of U.S. Treasury securities in the financial system. Using confidential supervisory data, we estimate the degree of collateral re-use at the dealer level through their collateral multiplier : the ratio between a dealer's total secured funding and their outright holdings financed through secured funding. We find that Treasury re-use increases as the supply of available securities decreases, especially when supply declines due to Federal Reserve asset purchases. We also find that non-U.S. dealers' re-use increases when profits from intermediating cash are high, ...
Finance and Economics Discussion Series , Paper 2020-103r1

Monograph
Treasury debt management under the rubric of regular and predictable issuance: 1983-2012
Garbade, Kenneth D. (2015)
This monograph is a program management history of regular and predictable issuance from 1983 to 2012. The present study examines how Treasury officials managed this relatively new financing mechanism over time and in light of changing funding requirements. It is a study in "normal" program management, examining incremental adaptations to changing circumstances.
Monograph

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