Research
Publications
Government Debt and Expectations-Driven Liquidity Traps
International Journal of Central Banking, forthcoming. | Third PhD chapter
Published version | WP version
Evaluates the effect of fiscal policy under distortionary taxation when self-fulfilling pessimistic expectations push the nominal interest rate to the zero lower bound constraint. The accumulation of government debt stemming from the fiscal expansion is large in this environment, yielding a negative output multiplier due to expectations of high real interest rates upon the exit of the trap. A welfare optimising strategy is proposed.
Looking Beyond the Trap: Fiscal Legacy and Central Bank Independence
Oxford Bulletin of Economics and Statistics, Vol. 86, pp. 385-416, April 2024. | First PhD chapter
Studies the implications of lacking coordination for the optimal time-consistent fiscal and monetary policy response to a large negative demand shock that triggers a zero lower bound event. Conducting monetary policy independently from fiscal considerations increases welfare through enhanced price stability but contractionary fiscal policy yields deeper recessions in the near term.
Journal of Economic Dynamics & Control, Vol. 147, Article 104591, February 2023.
Published version | WP version.
Shows that accumulating debt when the nominal rate is constrained by the zero lower bound can turn optimal for a discretionary policy maker independently of debt maturity. Key to this result is the presence of sluggish wage adjustments and of limited asset market participation in the economy.
Working papers
Managing the Inflation-Output Trade-off with Public Debt Portfolios (with B. Chafwehé and R. Oikonomou)
Supersedes the paper titled 'Debt Management in a World of Fiscal Dominance' (second PhD chapter).
Latest version (April 2024)
Investigates the role of debt portfolio management in stabilizing the economy following a set of exogenous shocks in the Fiscal Theory of the Price Level. Welfare maximizing portfolios are driven by hedging considerations and focus predominantly on supply-side shocks.
Optimal Monetary Policy Rules in the Fiscal Theory of the Price Level (with B. Chafwehé and R. Oikonomou)
LIDAM Discussion Paper IRES, 2022, No 2022/07
Latest version (November 2022)
Derives analytically interest rate rules that approximate the Ramsey outcome in the FTPL. The rules are simple functions of the maturity of government debt. When buy backs of government bonds are ruled out, issuing a positive amount of short-term debt becomes a necessary condition for determinacy. Our framework thus provides an alternative view to the supremacy of long-term debt usually found in optimal policy models.
Learning and the Role of Inflation in Fiscal Policy
WP, 2019. [available upon request].
Policy work
Assessing the impact of two Belgian specificities on competitiveness and purchasing power when an energy shock hits (with T. Lejeune and G. de Walque)
Prepared for the Belgian Financial Forum, March 2023.
Work in progress
Heterogenous effects of commodity price shocks (with G. de Walque, T. Lejeune, J. Mohimont and A. Rannenberg)