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In the past decade, a new paradigm for fiscal and monetary policy analysis has emerged, combining the canonical macro model of income and wealth inequality with the New Keynesian model. These Heterogeneous-Agent New Keynesian ("HANK") models feature new transmission channels and allow for the...
Persistent link: https://www.econbiz.de/10015072932
The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of … determines the path of expected inflation, while news about the present value of surpluses drives unexpected inflation. I use … fiscal theory to interpret historical episodes, including the rise and fall of inflation in the 1970s and 1980s, the long …
Persistent link: https://www.econbiz.de/10013361983
Our current inflation stemmed from a fiscal shock. The Fed is slow to react. Why? Will the Fed's slow reaction spur … more inflation? I write a simple model that encompasses the Fed's mild projections and its slow reaction, and traditional … views that inflation will surge without swift rate rises. The key question is whether expectations are forward looking or …
Persistent link: https://www.econbiz.de/10013210124
We analyze the impact of fiscal and monetary stimulus in an economy with mortgage debt, where inflation redistributes … inflation, increasing consumption demand and house prices. The power of fiscal stimulus grows when borrowers are more indebted …. We then show quantitatively that transfers followed by easy monetary policy cause a surge in inflation which helps …
Persistent link: https://www.econbiz.de/10014576602
policy will temporarily aid debt sustainability through a temporary burst in inflation. The anticipation of a possible reform … links debt levels with inflation expectations. As a result, interest rates have two effects: they influence demand and … affect expected inflation in opposite directions. The expectations effect is linked to the impact of interest rates on public …
Persistent link: https://www.econbiz.de/10015145141
We derive closed-form solutions and sufficient statistics for inflation and GDP dynamics in multi-sector New Keynesian … of inflation and GDP responses to monetary and sectoral shocks and (2) increase the pass-through of sectoral shocks to … aggregate inflation. Quantitatively, we confirm the significant role of production networks in shock propagation, emphasizing …
Persistent link: https://www.econbiz.de/10014287319
We show that if the central bank operates without commitment and faces constraints on its balance sheet, helicopter drops can be a useful stabilization tool during a liquidity trap. With commitment, even with balance sheet constraints, helicopter drops are irrelevant
Persistent link: https://www.econbiz.de/10014247967
We analyze whether government spending multipliers differ by the sign of the shock. Using aggregate historical U.S. data, we apply Ben Zeev's (2020) nonlinear diagnostic tests and find evidence of nonlinearities in the impulse response functions of both government spending and GDP. We then...
Persistent link: https://www.econbiz.de/10014247936
decomposition-based approach, we show how to unpack heterogeneity in the fiscal multiplier, an object that at any point in time may … our application, the fiscal multiplier varies considerably with monetary policy: it can be as small as zero, or as large …
Persistent link: https://www.econbiz.de/10014226168
rate together with QE or fiscal transfers, can stabilize three targets simultaneously: inflation, the aggregate output gap …
Persistent link: https://www.econbiz.de/10013477198