Debt and Monetary Policy: The Policy Issues

38 Pages Posted: 7 Oct 1996 Last revised: 25 Sep 2022

See all articles by Rudiger Dornbusch

Rudiger Dornbusch

Massachusetts Institute of Technology (MIT) (Deceased)

Date Written: May 1996

Abstract

The paper explores the implications of high debt for monetary policy. In Europe, debt (and deficits) play a special role at present in the run up to Maastricht because large debts are seen as a threat to the integrity of the new European money. The paper reviews two historical episodes-- the German, UK, and French experience in the 1920s and the US debt liquidation of the 1950-1980 period. The theoretical review focuses on hypotheses of Keynes, Clark and Sargent- Wallace. The paper adds to the range of concerns private balance sheet vulnerability.

Suggested Citation

Dornbusch, Rudiger W., Debt and Monetary Policy: The Policy Issues (May 1996). NBER Working Paper No. w5573, Available at SSRN: https://ssrn.com/abstract=3384

Rudiger W. Dornbusch (Contact Author)

Massachusetts Institute of Technology (MIT) (Deceased)

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