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| Author: | Schreft, S. L. Smith, B. D. |
| Title: | The conduct of monetary policy with a shrinking stock of government debt |
| Journal: | Journal of Money, Credit and Banking
2002 : AUG, VOL. 34:3, part 2, p. 848-882 |
| Index terms: | Monetary policy Central banks Debt management USA |
| Language: | eng |
| Abstract: | The author considers the consequences for a central bank of a declining stock of government debt. The model has a treasury that taxes, spends, and issues debt; a central bank that conducts open market operations in treasury debt; and banks that intermediate private savings. It suggests that a sufficiently small stock of debt can put an economy on the Pareto inferior side of theseignioage Laffer curve, implying unnecessarily high inflation. Discount-window lending is a potentially desirable alternative to open market operations, especially if the loans are not subsidized. |
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