Monetary-fiscal interactions and redistribution in a small open economy TANK model - 🚨new WP🚨. If you're curious who will "pay for ballooning public debt" after covid stimuli in emerging markets and how monetary-fiscal policies can coordinate:
cadmus.eui.eu/handle/1814/68…
thread 👇 1/ As long as r*<r<g, monetary policy can support fiscal expansion by keeping the costs of public debt low (r<g), w/o having to worry about runaway inflation (r*<r): no future taxes needed to pay for current budget deficits, while inflation also stays low.

THREAD on Hungarian 🇭🇺 monetary policy in #covid19 crisis management. Central bank's announcements today illustrate the dilemma of emerging markets as policymakers face a starker trade-off between providing cheap liquidity and leaning against FX-depreciation pressures 1/n Just like elsewhere, governments and firms in emerging markets (EM) need cheap liquidity (in local currency) to finance the fight against the #covid19 crisis. This calls for cuts in interest rates by monetary policy. 2/n

A. Orphanides has long been warning about the @ecb using external private credit rating agencies to determine collateral eligibility of € gov debt. Will this finally be changed, or is the Italian banking system really at S&P's mercy at the end of April?
voxeu.org/article/how-ec… A potential downgrade of Italian sovereign debt would entail the ECB not accepting it as collateral any more in its normal monetary operations with banks. A large amount of IT gov debt is hold by IT banks, whose access to ECB liquidity would be curtailed, leaving only ELA.