Panel Discussion of: Bailouts

Tim Landvoigt responded to the discussants and to some of the comments in the chat. First, he addressed the topic of monetary policy, arguing that in the model there is no role for monetary policy, but that this clearly plays an important role in the real world. He added that during the COVID-19 crisis, central banks were already stuck at the zero lower bound, an aspect which is however absent from the paper. Introducing the ZLB would probably result in the model predicting much more severe drops in activity in the no intervention scenario. Similarly, it is likely that the effects of policy intervention would be amplified because of the introduction of the ZLB. However, he also noted that allowing for the ZLB would result in a series of technical and computational challenges.