Economics Explored

Financing the COVID-19 Government Debt

Episode Summary

A conversation on financing the huge amount of government debt accumulated during the COVID-19 pandemic with Dr Begoña Dominguez, Associate Professor in the School of Economics at the University of Queensland.

Episode Notes

Dr Begoña Dominguez speaks with Economics Explored host Gene Tunny about her recent video on Financing the COVID-19 Government Debt.

Begoña Dominguez is currently Associate Professor at the School of Economics, University of Queensland. Her research interests are in the area of macroeconomics and, more specifically, in the design of optimal fiscal and monetary policies. Her research has been published in top journals in economics, such as Journal of Monetary Economics and Journal of Economic Theory, among other outlets.

In her video, Begoña outlines three thought provoking proposals to assist with financing the COVID-19 government debt, specifically:

1. coordinated fiscal and monetary policies with a temporary lift in the inflation target, along the lines of what was suggested by Bianchi, Faccini, and Melosi (2020) Monetary and Fiscal Policies in Times of Large Debt: Unity is Strength

2. social contract, whereby an evaluation is done after the pandemic is over to determine whether some groups were under or over-compensated, and that evaluation could guide future tax policies

3. improving the efficiency of the tax system, to ensure that whatever revenue is raised is raised in the most efficient way possible. 

In the conversation, Begoña mentions that the US Federal Reserve has modified its inflation target during the pandemic. For further information, see: 

What does average inflation targeting mean for investors?