This paper proposes a novel mechanism through which deficits stimulate the economy. When both the fiscal and monetary authorities lack full credibility, the public has heterogeneous beliefs about the government's fiscal capacity and the path of interest rates. Fiscal expansion can then convince some agents that monetary policy will be more accommodative because otherwise the government's expected fiscal capacity would fall short of the expected fiscal adjustment requirement. We focus on a liquidity trap environment where conventional monetary policy is no longer available, making this channel particularly relevant. We argue that this mechanism is consistent with some distinct features of the post-pandemic inflation episode in the Euro area.
Publication
Brand-switching and tobacco taxation in Vietnam; Tobacco Control 2022;31:s88-s94. (with Anh N. Nguyen and Nuong A. Nguyen)
Income and cigarette price responsiveness: evidence from Vietnam; Tobacco Control 2022;31:s152-s157 (with Anh N. Nguyen)
Tobacco Excise Tax Increase and Illicit Cigarette Consumption: Evidence from Vietnam ", Tobacco Control 2020;29:s275-s280 (with Anh N. Nguyen)
Policy Reports
NO TIME TO WASTE: The challenges and opportunities of cleaner trade for Vietnam, World Bank 2022 (with Madani Dorsati and Jacques Morisset)
Vietnam Fiscal Update: Aggregate Fiscal Impact of COVID-19, World Bank 2021 (with Madani Dorsati and Nguyen Viet Anh)