The goal of the project is to develop economic models for the design of fiscal and monetary policies to tackle the current economic crisis – the primary objective of the European Commission Work programme for 2013. The first part of the project will develop a framework to determine what should be the primary objectives of central banks. The main goal is to understand if central banks should only focus on maintaining price stability – the conventional wisdom in among academics and practitioners– or should instead devote more and more attention to other objectives, like reducing unemployment and stabilizing the financial markets. The results will be particularly relevant for current debates at the European Level about the goals of the European Central Bank. The second part of the project develops a framework for the management of the debt maturity structure to explain the existing relationship between debt holdings and interest rates paid by governments. The successful completion of the project will contribute to the current debate about the potential benefits from the adequate management of public debt, in terms of reduction of the costs of financing, that will ultimately translate into higher social welfare.
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