Gauging the effects of the German COVID-19 fiscal stimulus package

Arbeitspapier

We simulate the fiscal stimulus packages set up by the German government to allevi-ate the costs of the COVID-19 pandemic in a dynamic New Keynesian multi-sectorgeneral equilibrium model. We find that, cumulated over 2020-2022, output lossesrelative to steady state can be reduced by more than 4 PP. On average, welfare costsof the pandemic can be mitigated by 5%, and even by 20% for liquidity-constrainedhouseholds. The long-run present value multiplier of the package amounts to 0.2. Consumption tax cuts and transfers to households primarily stabilize private con-sumption, and subsidies prevent firm defaults. The most cost-efficient measure isan increase in productivity-enhancing public investment. However, it materializesonly in the medium to long-term.

Object Details

• ISBN: 978-3-95729-851-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Deutsche Bundesbank Discussion Paper ; No. 43/2021

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Fiscal Policies and Behavior of Economic Agents: General
• Subject: Fiscal Policy ; COVID-19 ; DSGE Modelling ; Sectoral Heterogeneity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hinterlang, Natascha ; Moyen, Stéphane ; Röhe, Oke ; Stähler, Nikolai
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/247681
• Last update: 10.03.2025, 11:41 AM CET