This paper explores a natural connection between fiscal multipliers and foreign holdings of public debt. Although fiscal expansions can raise domestic economic activity through various channels, they can also have crowding-out effects if the resources used to acquire public debt reduce domestic...

This paper uses two established DSGE models (QUEST III and Smets-Wouters) to assess the impact of fiscal spending cuts on output and, in particular, also on inflation in the euro area under alternative settings for monetary policy. We compare four different settings of constrained monetary...

The paper presents a model-based assessment of fiscal multipliers operating in the euro area during the period 2011-2014. The assessment is conditional on two distinct reactions of the sovereign risk premium (either responding endogenously to fiscal shocks or being an exogenous process) and two...

We quantify the size of fiscal multipliers under financial fragmentation risk and demonstrate how non-standard monetary policy can support the macroeconomic transmission of fiscal interventions. We employ a DSGE model with financial frictions whereby the interplay of corporate, banks and...

Identifying fiscal multipliers is usually constrained by the absence of a counterfactual scenario. Our new data set allows overcoming this problem by making use of the fact that recommendations under the EU's excessive deficit procedure (EDP) provide both a baseline no-policy-change scenario and...

We suggest a new method dealing with the problem of endogeneity of the threshold variable in single regression threshold models and seemingly unrelated systems of them based on copula theory. This theory enables us to relax the assumption that the threshold variable is normally distributed and...

This paper finds that debt-financed fiscal multipliers vary depending on the location of the debt buyer. In a sample of 33 countries fiscal multipliers are larger when government purchases are financed by issuing debt to foreign investors (non-residents), compared to when they are financed by...

The literature on fiscal multipliers finds that spending-based fiscal consolidations tend to have more benign macro-economic consequences than revenue-based consolidations. By directly comparing ex-post data with consolidation plans, we present evidence of a systematically weaker follow-up of...