multiplier effect), it quickly rises above pre-shock levels. The rebound in investment is facilitated by fiscal space, flexible … investment contractions on impact, but drive private investment to above pre-shock levels. Finally, we exploit firm … sector and in larger and less indebted firms, and to show that the long-run benefits to economic activity of the fiscal shock …

model includes a financial accelerator--entrepreneurs are assumed to partially finance investment using domestic and foreign … importance of the financial accelerator in India and the optimality of monetary policy …

We develop a model with diagnostic expectations (DE) and a financial accelerator (FA) that generates mutually … reinforcing shock amplification, especially in the case of demand shocks. However, supply shocks can be dampened via a debt … asset prices—our financial accelerator model with DE suggests that targeting house price growth may result in welfare gains …