Download or read book Fiscal Multipliers at the Zero Lower Bound written by Taisuke Nakata and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Fiscal Multipliers at the Zero Lower Bound written by Federal Reserve Federal Reserve Board and published by CreateSpace. This book was released on 2015-04-27 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The presence of the lagged shadow policy rate in the interest rate feedback rule reduces the government spending multiplier nontrivially when the policy rate is constrained at the zero lower bound (ZLB). In the economy with policy inertia, increased inflation and output due to higher government spending during a recession speed up the return of the policy rate to the steady state after the recession ends. This in turn dampens the expansionary effects of the government spending during the recession via expectations. In our baseline calibration, the output multiplier at the ZLB is 2.5 when the weight on the lagged shadow rate is zero, and 1.1 when the weight is 0.9.

Download or read book Small and Orthodox Fiscal Multipliers at the Zero Lower Bound written by R. Braun and published by . This book was released on 2015 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Does fiscal policy have large and qualitatively different effects on the economy when the nominal interest rate is zero? An emerging consensus in the New Keynesian literature is that the answer is yes. New evidence provided here suggests that the answer is often no. For a broad range of empirically relevant parameterizations of the Rotemberg model of costly price adjustment, the government purchase multiplier is about one or less, and the response of hours to a tax cut is either negative or close to zero.

Download or read book Fiscal Multipliers and the Choice of Zero Lower Bound Modeling written by Thomas Siemsen and published by . This book was released on 2013 with total page 7 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book How Big Small are Fiscal Multipliers written by Ethan Ilzetzki and published by International Monetary Fund. This book was released on 2011-03-01 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: We contribute to the intense debate on the real effects of fiscal stimuli by showing that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a novel quarterly dataset of government expenditure in 44 countries, we find that (i) the output effect of an increase in government consumption is larger in industrial than in developing countries, (ii) the fisscal multiplier is relatively large in economies operating under predetermined exchange rate but zero in economies operating under flexible exchange rates; (iii) fiscal multipliers in open economies are lower than in closed economies and (iv) fiscal multipliers in high-debt countries are also zero.

Download or read book Small and Orthodox Fiscal Multipliers at the Zero Lower Bound written by R. Anton Braun and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Euro Area Government Spending Multiplier at the Effective Lower Bound written by Adalgiso Amendola and published by International Monetary Fund. This book was released on 2019-06-28 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We build a factor-augmented interacted panel vector-autoregressive model of the Euro Area (EA) and estimate it with Bayesian methods to compute government spending multipliers. The multipliers are contingent on the overall monetary policy stance, captured by a shadow monetary policy rate. In the short run (one year), whether the fiscal shock occurs when the economy is at the effective lower bound (ELB) or in normal times does not seem to matter for the size of the multiplier. However, as the time horizon increases, multipliers diverge across the two regimes. In the medium run (three years), the average multiplier is about 1 in normal times and between 1.6 and 2.8 at the ELB, depending on the specification. The difference between the two multipliers is distributed largely away from zero. More generally, the multiplier is inversely correlated with the level of the shadow monetary policy rate. In addition, we verify that EA data lend support to the view that the multiplier is larger in periods of economic slack, and we show that the shadow rate and the state of the business cycle are autonomously correlated with its size. The econometric approach deals with several technical problems highlighted in the empirical macroeconomic literature, including the issues of fiscal foresight and limited information.

Download or read book Fiscal Policy after the Financial Crisis written by Alberto Alesina and published by University of Chicago Press. This book was released on 2013-06-25 with total page 596 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent recession has brought fiscal policy back to the forefront, with economists and policy makers struggling to reach a consensus on highly political issues like tax rates and government spending. At the heart of the debate are fiscal multipliers, whose size and sensitivity determine the power of such policies to influence economic growth. Fiscal Policy after the Financial Crisis focuses on the effects of fiscal stimuli and increased government spending, with contributions that consider the measurement of the multiplier effect and its size. In the face of uncertainty over the sustainability of recent economic policies, further contributions to this volume discuss the merits of alternate means of debt reduction through decreased government spending or increased taxes. A final section examines how the short-term political forces driving fiscal policy might be balanced with aspects of the long-term planning governing monetary policy. A direct intervention in timely debates, Fiscal Policy after the Financial Crisis offers invaluable insights about various responses to the recent financial crisis.

Download or read book The Government Spending Multiplier at the Zero Lower Bound written by Mario Di Serio and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate state-dependent government spending multipliers for the United States. We use a Factor-Augmented Interacted Vector Autoregression (FAIVAR) model. This allows us to capture the time-varying monetary policy characteristics including the recent zero interest rate lower bound (ZLB) state, to account for the state of the business cycle, and to address the limited information problem typically inherent in VARs. We identify government spending shocks by sign restrictions and use a government spending growth forecast series to account for the effects of anticipated fiscal policy. In our baseline specification, we find that government spending multipliers in a recession range from 3:56 to 3:79 at the ZLB. Away from the ZLB, multipliers in recessions range from 2:31 to 3:05. Several robustness analyses confirm that multipliers are higher, when the interest rate is lower and that multipliers in recessions exceed multipliers in expansions. Our results are consistent with theories that predict larger multipliers at the ZLB.

Download or read book Fiscal Policy Multipliers in a New Keynesian Model Under Positive and Zero Nominal Interest Rate written by Lorant Kaszab and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a simple new-Keynesian model (with and without capital) and calculates multipliers of four types. That is, we assume either an increase in government spending or a cut in sales/labor/capital tax that is financed by lump-sum taxes (Ricardian evidence holds). We argue that multipliers of a temporary fiscal stimulus for separable preferences and zero nominal interest rate results in lower values than what is obtained by Eggertsson (2010). Using Christiano et al. (2009) non-separable utility framework which they used to calculate spending multipliers we study tax cuts as well and find that sales tax cut multiplier can be well above one (joint with government spending) when zero lower bound on nominal interest binds. In case of a permanent stimulus we show in the model without capital and assuming non-separable preferences that it is the spending and wage tax cut which produce the highest multipliers with values lower than one. In the model with capital and assuming that the nominal rate is fixed for a one-year (or two-year) duration we present an impact multiplier of government spending that is very close to the one in Bernstein and Romer (2009) but later declines with horizon in contrast to their finding and in line with the one of Cogan et al. (2010). We also demonstrate that the long-run spending multiplier calculated similarly to Campolmi et al. (2010) implies roughly the same value for both types of preferences for particular calibrations. For comparison, we also provide long-run multipliers using the method proposed by Uhlig (2010). -- New-Keynesian model ; fiscal multipliers ; zero lower bound ; monetary policy ; government spending ; tax cut ; permanent ; transitory

Download or read book The Government Spending Multiplier Fiscal Stress and the Zero Lower Bound written by Felix Strobel and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent sovereign debt crisis in the Eurozone was characterized by a monetary policy, which has been constrained by the zero lower bound (ZLB) on nominal interest rates, and several countries, which faced high risk spreads on their sovereign bonds. How is the government spending multiplier affected by such an economic environment?While prominent results in the academic literature point to high government spending multipliers at the ZLB, higher public indebtedness is often associated with small government spending multipliers. I develop a DSGE model with leverage constrained banks that captures both features of this economic environment, the ZLB and fiscal stress. In this model, I analyze the effects of government spending shocks. I find that not only are multipliers large at the ZLB, the presence of fiscal stress can even increase their size. For longer durations of the ZLB,multipliers in this model can be considerably larger than one. JEL Classification: E32, E 44, E62

Download or read book Building Back Better How Big Are Green Spending Multipliers written by International Monetary Fund and published by International Monetary Fund. This book was released on 2021-03-19 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides estimates of output multipliers for spending in clean energy and biodiversity conservation, as well as for spending on non-ecofriendly energy and land use activities. Using a new international dataset, we find that every dollar spent on key carbon-neutral or carbon-sink activities can generate more than a dollar’s worth of economic activity. Although not all green and non-ecofriendly expenditures in the dataset are strictly comparable due to data limitations, estimated multipliers associated with spending on renewable and fossil fuel energy investment are comparable, and the former (1.1-1.5) are larger than the latter (0.5-0.6) with over 90 percent probability. These findings survive several robustness checks and lend support to bottom-up analyses arguing that stabilizing climate and reversing biodiversity loss are not at odds with continuing economic advances.

Download or read book Macroeconomic Implications of the Zero Lower Bound written by Johannes Friedrich Wieland and published by . This book was released on 2013 with total page 426 pages. Available in PDF, EPUB and Kindle. Book excerpt: What policies are effective at combatting recessions when the zero lower bound (ZLB) binds? This dissertations contributes to this question in at least three ways. First, it examines several such policies in a standard macroeconomic framework. Second, it uses extensive robustness checks as well as macroeconomic and financial data to validate or reject the key mechanisms that are at work in these models. Third, in the case of rejection, the standard framework is modified to match the data and this improved framework is used to re-evaluate the policies in question. This produces new insights relative to existing literature that has largely remained within the standard macroeconomic framework. This dissertation first analyzes whether central banks should raise their inflation targets in light of the ZLB. It explicitly incorporates positive steady-state (or ``trend'') inflation in standard macroeconomic models as well as the ZLB on nominal interest rates. For plausible calibrations with costly but infrequent episodes at the zero-lower bound, the optimal inflation rate is low, typically less than two percent, even after considering a variety of extensions, including endogenous and state-dependent price stickiness and downward nominal wage rigidities. The key intuition behind this result is that the unconditional cost of the zero lower bound is small even though each individual ZLB event is quite costly. In short, raising the inflation target is too blunt an instrument to efficiently reduce the severe costs of zero-bound episodes. Second, this dissertation considers whether fiscal policy be effective in an open economy with flexible exchange rates. Standard open economy models suggest that the open economy fiscal multiplier is small when exchange rates are flexible. This premise is reassessed by explicitly incorporating the ZLB on nominal interest rates in a small open economy New Keynesian model. It finds (1) when the ZLB binds and uncovered interest rate parity (UIP) holds, then the open economy fiscal multiplier is larger than 1 and bigger than the closed economy fiscal multiplier, (2) these conclusions can be reversed given significant violations of UIP, and (3) for estimated departures from UIP, the open economy fiscal multiplier at the ZLB is above 1 but smaller than the closed economy fiscal multiplier. Third, this dissertation tests for a key propagation mechanism in standard macroeconomic models -- the inflation expectations channel. Accordingly, government spending multipliers are large and negative supply shocks are expansionary at the ZLB because they lower expected real interest rates, which stimulates consumption. The second prediction is tested with oil supply shocks, an earthquake, and inflation risk premia, demonstrating that negative supply shocks are contractionary at the ZLB despite also lowering expected real interest rates. These facts are rationalized in a model with financial frictions. In this model demand-side policies, such as fiscal stimulus through government spending, are substantially less effective at the ZLB than in standard sticky-price models, because raising inflation expectations by raising production costs is no longer a source of stimulus.

Download or read book Monetary and Fiscal Policy Design at the Zero Lower Bound written by Cars H. Hommes and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global economic crisis of 2007-2008 has pushed many advanced economies into a liquidity trap. We design a laboratory experiment on the effectiveness of policy measures to avoid expectation-driven liquidity traps. Monetary policy alone is not sufficient to avoid liquidity traps, even if it preventively cuts the interest rate when inflation falls below a threshold. However, monetary policy augmented with a fiscal switching rule succeeds in escaping liquidity trap episodes. We measure the effect of fiscal policy on expectations, and report larger-than-unity fiscal multipliers at the zero lower bound. Experimental results in different treatments are well explained by adaptive learning.

Download or read book Government Spending Multipliers and the Zero Lower Bound in an Open Economy written by Charles Olivier Mao Takongmo and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the size of the government-spending multiplier in an open economy when the zero lower bound (ZLB) on the nominal interest rate is binding. In a theoretical framework, in a closed economy, other authors have shown that when the nominal interest rate is binding the government-spending multiplier can be very large (close to four). Their theory helps illuminate the government-spending multiplier in the ZLB, but it is difficult to match that theory with the data. We argue that, in an open economy, another channel exists for the crowding-out effect via the real exchange rate. For an open economy, the government-spending multiplier is not large owing to the appreciation of the real exchange rate, induced by the appreciation of aggregate demand that follows the increases in government spending. To test the robustness of our open economic model, we conduct the same analysis in a corresponding closed economy model. The result from our closed economy model confirms the result obtained in the other work. Our theoretical results are consistent with the results obtained in the empirical literature, which uses the vector autoregressive method and the structural vector autoregressive approach to measure the impact of government-spending shock on the real gross domestic product and revealed that the government-spending multiplier tends to be lower in open economy.

Download or read book What Have We Learned written by George A. Akerlof and published by MIT Press. This book was released on 2016-09-02 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: Top economists consider how to conduct policy in a world where previous beliefs have been shattered by the recent financial and economic crises. Since 2008, economic policymakers and researchers have occupied a brave new economic world. Previous consensuses have been upended, former assumptions have been cast into doubt, and new approaches have yet to stand the test of time. Policymakers have been forced to improvise and researchers to rethink basic theory. George Akerlof, Nobel Laureate and one of this volume's editors, compares the crisis to a cat stuck in a tree, afraid to move. In April 2013, the International Monetary Fund brought together leading economists and economic policymakers to discuss the slowly emerging contours of the macroeconomic future. This book offers their combined insights. The editors and contributors—who include the Nobel Laureate and bestselling author Joseph Stiglitz, Federal Reserve Vice Chair Janet Yellen, and the former Governor of the Bank of Israel Stanley Fischer—consider the lessons learned from the crisis and its aftermath. They discuss, among other things, post-crisis questions about the traditional policy focus on inflation; macroprudential tools (which focus on the stability of the entire financial system rather than of individual firms) and their effectiveness; fiscal stimulus, public debt, and fiscal consolidation; and exchange rate arrangements.

Download or read book Fiscal Multipliers written by Nicoletta Batini and published by International Monetary Fund. This book was released on 2014-10-02 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Fiscal multipliers are important tools for macroeconomic projections and policy design. In many countries, little is known about the size of multipliers, as data availability limits the scope for empirical research. This note provides general guidance on the definition, measurement, and use of fiscal multipliers. It reviews the literature related to their size, persistence and determinants. For countries where no reliable estimate is available, the note proposes a simple method to come up with reasonable values. Finally, the note presents options to incorporate multipliers in macroeconomic forecasts.