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Abstract

This paper presents a model of quantitative easing (QE) at the zero lower bound (ZLB) on the short-term nominal interest rate. QE, which reduces the maturity of government debt, is effective at the ZLB because it generates expectations of future monetary expansion in a time-consistent equilibrium. Numerical experiments show that this effect can be substantial.

Citation

Saroj Bhattarai & Gauti B Eggertsson & Bulat Gafarov, 2023. “Time Consistency and Duration of Government Debt: A Model of Quantitative Easing,” The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(4), pages 1759-1799.

@article{bhattarai2023time,
  title={Time consistency and duration of government debt: A model of quantitative easing},
  author={Bhattarai, Saroj and Eggertsson, Gauti B and Gafarov, Bulat},
  journal={The Review of Economic Studies},
  volume={90},
  number={4},
  pages={1759--1799},
  year={2023},
  publisher={Oxford University Press US}
}