Based on a large historical panel dataset, this paper provides robust evidence that the government spending multiplier is significantly higher when interest rates are at, or near, the zero lower bound. We estimate fiscal multipliers that are around 1.5 during zero lower bound episodes and...

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...