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The Costs of Macroprudential Deleveraging in a Liquidity Trap

Chen, Jiaqian - 2020

We examine the effects of various borrower-based macroprudential tools in a New Keynesian environment where both real and nominal interest rates are low. Our model features long-term debt, housing transaction costs and a zero-lower bound constraint on policy rates. We find that the long-term...

Persistent link: https://www.econbiz.de/10012828224

U.S. And Euro Area Monetary and Fiscal Interactions During the Pandemic : A Structural Analysis

Hodge, Andrew; Jakab, Zoltan; Lindé, Jesper; Nguyen, … - 2022

This paper employs a two-country New Keynesian DSGE model to assess the macroeconomic impact of the changes in monetary policy frameworks and the fiscal support in the U.S. and euro area during the pandemic. Moving from a previous target of “below, but close to 2 percent” to a formal...

Persistent link: https://www.econbiz.de/10014237881

Is There a Fiscal Free Lunch in a Liquidity Trap?

Erceg, Christopher; Lindé, Jesper - C.E.P.R. Discussion Papers - 2010

This paper uses a DSGE model to examine the effects of an expansion in government spending in a liquidity trap. The … spending multiplier can be much larger than in the normal situation if the liquidity trap is very prolonged, and the budgetary … expansion. Our paper addresses this question in a model environment where the duration of the liquidity trap is determined …

Persistent link: https://www.econbiz.de/10008468666

Fiscal Consolidation in a Currency Union: Spending Cuts vs. Tax Hikes

Erceg, Christopher; Lindé, Jesper - C.E.P.R. Discussion Papers - 2012

This paper uses a two country DSGE model to examine the effects of tax-based versus expenditure-based fiscal consolidation in a currency union. We find three key results. First, given limited scope for monetary accommodation, tax-based consolidation tends to have smaller adverse effects on...

Persistent link: https://www.econbiz.de/10011083421

Fiscal Consolidation in an Open Economy

Erceg, Christopher; Lindé, Jesper - C.E.P.R. Discussion Papers - 2012

This paper uses a New Keynesian DSGE model of a small open economy to compare how the effects of fiscal consolidation differ depending on whether monetary policy is constrained by currency union membership or by the zero lower bound on policy rates. We show that there are important differences...

Persistent link: https://www.econbiz.de/10011083967

Effective Fiscal-Monetary Interactions in Severe Recessions

Chen, Jiaqian; Espinoza, Raphael A.; Goncalves, Carlos; … - 2022

The COVID-19 pandemic and the subsequent need for policy support have called the traditional separation between fiscal and monetary policies into question. Based on simulations of an open economy DSGE model calibrated to emerging and advance economies and case study evidence, the analysis shows...

Persistent link: https://www.econbiz.de/10013491963

Shared Problem, Shared Solution : Benefits from Fiscal-Monetary Interactions in the Euro Area

Beyer, Robert; Duttagupta, Rupa; Fotiou, Alexandra; … - 2023

This paper employs two established macroeconomic models to show that fiscal policy in the euro area can help monetary policy in reducing inflation. Specifically, a fiscal consolidation of 1 percent of GDP for two years and 0.5 percent in the third year across the euro area would ease the policy...

Persistent link: https://www.econbiz.de/10014352982

Fiscal Policy and the Current Account

Ali Abbas, S.M.; Bouhga-Hagbe, Jacques; Fatás, Antonio; … - C.E.P.R. Discussion Papers - 2010

This paper examines the relationship between fiscal policy and the current account, drawing on a larger country sample than in previous studies and using panel regressions, vector auto-regressions, and an analysis of large fiscal and external adjustments. On average, a strengthening in the...

Persistent link: https://www.econbiz.de/10008468562

The Macroeconomic Effects of Fiscal Rules in the US States

Fatás, Antonio; Mihov, Ilian - C.E.P.R. Discussion Papers - 2004

Fiscal policy restrictions are often criticized for limiting the ability of governments to react to business cycle fluctuations. Therefore, the adoption of quantitative restrictions is viewed as inevitably leading to increased macroeconomic volatility. In this Paper we use data from 48 US states...

Persistent link: https://www.econbiz.de/10005136666

Government Size and Automatic Stabilizers: International and Intranational Evidence

Fatás, Antonio; Mihov, Ilian - C.E.P.R. Discussion Papers - 1999

This paper studies the role of automatic stabilizers using a sample of OECD countries and US states. We find that there is a strong and robust negative correlation between measures of government size and the volatility of output. This correlation is robust to the inclusion of a large set of...

Persistent link: https://www.econbiz.de/10005504602