02237cas a2200277 a 4500 AALejournalIMF017544 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475590180 1018-5941 BD-DhAAL BD-DhAAL Cantore, Cristiano. Optimal Fiscal and Monetary Policy, Debt Crisis and Management / Cristiano Cantore, Paul Levine, Giovanni Melina, Joseph Pearlman. Washington, D.C. : International Monetary Fund, 2017. 1 online resource (44 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The initial government debt-to-GDP ratio and the government's commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidation is very slow. A faster pace is optimal when the economy starts from a high level of public debt implying high sovereign risk premia, unless these are suppressed via a bailout by official creditors. Under discretion, the cost of not being able to commit is reflected into a quick consolidation of government debt. Simple monetary-fiscal rules with passive fiscal policy, designed for an environment with 'normal shocks', perform reasonably well in mimicking the Ramsey-optimal response to one-off government debt shocks. When the government can issue also long-term bonds-under commitment-the optimal debt consolidation pace is slower than in the case of short-term bonds only, and entails an increase in the ratio between long and short-term bonds. Mode of access: Internet Levine, Paul. Melina, Giovanni. Pearlman, Joseph. IMF Working Papers; Working Paper ; No. 2017/078 Full text available on IMF http://elibrary.imf.org/view/journals/001/2017/078/001.2017.issue-078-en.xml IMF e-Library