How can higher interest rates impact government budget deficits?

Keywords: Monetary policy, collateral constraints, currency mismatches, carry trade, spillovers. Page 2. BIS Working Papers are written by members of the ... A contractionary monetary policy will raise interest rates, discourage borrowing for investment and consumption spending, and cause the original demand curve ( ... Jun 26, 2024 ... In the United States, growth is expected to slow down and the continued contractionary monetary policy will have a dampening effect on ... Aug 15, 2024 ... Contractionary monetary policy reduces the CPI (seasonally adjusted price level), lowering industrial production and raising unemployment – all after a ... The findings suggest that wealth inequality increases after a contractionary monetary policy shock, with the effects becoming more pronounced over time. The ... This heterogeneity primarily stems from the less favorable labor market responses of minority groups to contractionary monetary policy. These findings emphasize ... policy on output is answered clearly: contractionary monetary policy leads to contractions in real GDP. H. Uhlig / Journal of Monetary Economics 52 (2005) 381– ... At the same time, the unemployment rate is very low. In this case, the Fed might decide to use contractionary monetary policy to bring inflation back to the ... They also point to the Fed's unwillingness to try unconventional easing policies in the wake of the financial crisis as a further tightening of monetary policy. Similarly, a monetary tightening only reduces inflation and output when accompanied by contractionary fiscal policy. These results are robust to several ...