Optimal monetary–fiscal policy in the euro area liquidity crisis
Central Bank of Ireland
New Keynesian DSGE model with liquidity shock in sovereign bonds market, cash-in-advance constraint where money and fraction of government bonds are accepted for purchases, zero lower bound on interest rates, and consolidated government-central
monopolistic competition, Calvo pricing with indexation to inflation target
Figure 6 p.12
Nominal GDP targeting (NGDPT) combined with optimal fiscal policy (OFP); inflation almost completely stabilized