  I examine global dynamics in a monetary model with overlapping generations of
finite-horizon agents and a binding lower bound on nominal interest rates. Debt
targeting rules exacerbate the possibility of self-fulfilling liquidity traps,
for agents expect austerity following deflationary slumps. Conversely, activist
but sustainable fiscal policy regimes - implementing intertemporally balanced
tax cuts and/or transfer increases in response to disinflationary trajectories
- are capable of escaping liquidity traps and embarking inflation into a
globally stable path that converges to the target. Should fiscal stimulus of
last resort be overly aggressive, however, spiral dynamics around the
liquidity-trap steady state exist, causing global indeterminacy.
