This paper examines the effects of expenditure-based fiscal consolidation when credibility as to whether the cuts will be long-lasting is imperfect. We contrast the impact limited credibility has when the consolidating country has the means to tailor monetary policy to its own needs, with the...

Recent influential work argue that a gradual increase in sales tax stimulates economic activityin a liquidity trap by boosting inflation expectations. Higher public infrastructure investmentshould also be more expansive in a liquidity trap than in normal times by raising the potentialinterest...