Exit Strategies

Roland Winkler (), Ignazio Angeloni () and Ester Faia

VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis from Verein für Socialpolitik / German Economic Association

Abstract: We study alternative scenarios for exiting the post-crisis fiscal and monetary accommodation using the model of Angeloni and Faia (2010), that combines a standard DSGE framework with a fragile banking sector, suitably modified and calibrated for the euro area. Credibly announced and fast fiscal consolidations dominate – based on simple criteria – alternative strategies incorporating various degrees of gradualism and surprise. The fiscal adjustment should be based on spending cuts or else be relatively skewed towards consumption taxes. The phasing out of monetary accommodation should be simultaneous or slightly delayed. We also find that, contrary to widespread belief, Basel III may well have an expansionary macroeconomic effect.

Keywords: exit strategies; debt consolidation; fiscal policy; monetary policy; capital requirements; bank runs (search for similar items in EconPapers)
JEL-codes: E63 G01 H12 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Exit strategies (2014)
Working Paper: Exit strategies (2014)
Working Paper: Exit Strategies (2011)
Working Paper: Exit strategies (2011)
Working Paper: Exit strategies (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc11:48734

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