NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Davide Debortoli

Universitat Pompeu Fabra, CREI and Barcelona GSE

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Universitat Pompeu Fabra

NBER Working Papers and Publications

May 2019On the Empirical (Ir)Relevance of the Zero Lower Bound Constraint
with Jordi Galí, Luca Gambetti: w25820
The zero lower bound (ZLB) irrelevance hypothesis implies that the economy's performance is not affected by a binding ZLB constraint. We evaluate that hypothesis for the recent ZLB episode experienced by the U.S. economy (2009Q1-2015Q4). We focus on two dimensions of performance that were likely to have experienced the impact of a binding ZLB: (i) the volatility of macro variables and (ii) the economy's response to shocks. Using a variety of empirical methods, we find little evidence against the irrelevance hypothesis, with our estimates suggesting that the responses of output, inflation and the long-term interest rate were hardly affected by the binding ZLB constraint, possibly as a result of the adoption and fine-tuning of unconventional monetary policies. We can reconcile our empirical ...
April 2019On the Empirical (Ir)relevance of the Zero Lower Bound Constraint
with Jordi Galí, Luca Gambetti
in NBER Macroeconomics Annual 2019, volume 34, Martin S. Eichenbaum, Erik Hurst, and Jonathan A. Parker, editors
We evaluate the hypothesis that the zero lower bound (ZLB) constraint was, in practice, irrelevant during the recent ZLB episode experienced by the U.S. economy (2009Q1–2015Q4). We focus on two dimensions of economic performance that were ex-ante likely to have been affected by a binding ZLB: (i) the volatility of macro variables and (ii) the economy's response to shocks. Using a variety of empirical methods, we find little evidence against the irrelevance hypothesis, with our estimates suggesting that the responses of output, inflation and the long-term interest rate were hardly affected by the binding ZLB constraint. We show how a shadow interest rate rule (which we take as a proxy for forward guidance) can reconcile our empirical findings with the predictions of a simple New Keynesian m...
April 2018Optimal Fiscal Policy without Commitment: Beyond Lucas-Stokey
with Ricardo Nunes, Pierre Yared: w24522
According to the Lucas-Stokey result, a government can structure its debt maturity to guarantee commitment to optimal fiscal policy by future governments. In this paper, we overturn this conclusion, showing that it does not generally hold in the same model and under the same definition of time-consistency as in Lucas-Stokey. Our argument rests on the existence of an overlooked commitment problem that cannot be remedied with debt maturity: a government in the future will not tax on the downward slopping side of the Laffer curve, even if it is ex-ante optimal to do so. In light of this finding, we propose a new framework to characterize time-consistent policy. We consider a Markov Perfect Competitive Equilibrium, where a government reoptimizes sequentially and may deviate from the optimal c...
October 2014Optimal Time-Consistent Government Debt Maturity
with Ricardo Nunes, Pierre Yared: w20632
This paper develops a model of optimal government debt maturity in which the government cannot issue state-contingent bonds and cannot commit to fiscal policy. If the government can perfectly commit, it fully insulates the economy against government spending shocks by purchasing short-term assets and issuing long-term debt. These positions are quantitatively very large relative to GDP and do not need to be actively managed by the government. Our main result is that these conclusions are not robust to the introduction of lack of commitment. Under lack of commitment, large and tilted positions are very expensive to finance ex-ante since they exacerbate the problem of lack of commitment ex-post. In contrast, a flat maturity structure minimizes the cost of lack of commitment, though it also li...

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